Weekly Market Recap – March 20, 2020
In the Markets
Last Sunday’s rate cutting action by the Fed to “nearly zero” percent preceded a sharp drop in stock futures that evening. By the end of Monday’s session, the DJIA spot index settled 2,997.10 points lower. The decline of 12.9% was the steepest daily drop since October 19, 1987. At the close on March 20th, the index had lost a total of 4,011.64 points, down 17.3% for the week. The June Dow futures mini contract’s weekly decline was 16.6%.
In other US stock benchmarks, negative price movement persisted. The S&P 500 fell by 15.0% and the Russell 2000 lost 15.7%. Of the indices we cite in these recap reports, the NASDAQ Composite fared a bit better than the others: it lost only 12.6%, which some analysts attributed to strength in the tech sector on Thursday.
The volatility that began the week had waned by Friday’s close, as measured by the CBOE Volatility Index. The VIX had closed on Monday at 83.56 (a 12 year high). The index eased to the Friday close of 66.04, which was only 14.2% higher than its March 13th close of 57.83.
The news throughout the week addressed a $50 billion aid package requested by the airlines, a new lending facility announced by the Fed to backstop the money market mutual fund sector, and a stimulus package that the executive and legislative branches are negotiating intended to inject over $1 trillion into the economy.
As the US Coronavirus metrics keep rising, with more people testing positive and the death toll increasing, an expected economic repercussion is a surge in unemployment claims.
In commodity markets, there were also some noteworthy records. Precious metals mostly continued to decline, with April gold falling $32.10 to $1,484.60 (-2.1% on the week), May silver dropped $2.30 to $12.385 (-15.7%), April platinum moved $121.40 lower to $622.50 (-16.3%) and June palladium firmed by $31.10 to $1.540.20 (+2.1%). The historic move of the ratio of gold to silver (GSR) to a level of 123.78 took place on Monday, March 16th. For the past 5 years, the ratio has been trading between 65 and 85. The fact that gold fell considerably less than silver is the key to the record move. The relationship between the values of the two metals is “perhaps the longest-running price series in financial history” according to Marshall Gittler, economist at BDSwiss Group. The previous record high for the GSR was 100:1 in 1940. The US government, in the Mint Act of 1792, had set the ratio at 15:1.
Another conspicuous milestone last week took place in the energy sector. When market participants learned that the Trump administration was addressing both sides of the oil price war between Russia and Saudi Arabia, the price of crude moved sharply higher. Thursday’s jump was the largest single day percentage increase in CME crude futures since the contracts were launched in 1983. That distinction had little impact on the overall picture, since the rally was followed by a selloff that sent April crude oil to $22.43 per barrel at Friday’s close (-29.3% for the week). Brent crude lost $6.87 for the week (-20.3%). Heating oil closed at $1.0063 (-11.5%) and gasoline settled at $0.6054 (-32.7%). In some states, drivers are starting to see gas pump prices below $2/gallon. Natural gas lost 14.2% for the week, closing at $1.604 in the April futures.
The grains and oilseeds were mixed. Last week started with selloffs on Monday but showed firming at Friday’s close. May corn eased 22¢ per bushel (-6.0%), May soybeans rose 13.75¢ (+1.6%) and May wheat rallied 6.6%, settling at $5.3925 up 33.25¢. An important planted acreage release is due at the end of March as we move towards the spring weather outlook. For the Ag hedgers, this USDA report can be a key driver in corn and wheat trends. Coffee has finally bounced out of its bearish doldrums as May futures rallied last week to 119.70 (+12.1%). Cocoa continued its pattern of a new downtrend, as the May contract tested the lows from last summer at the 2200 level. For the week, cocoa was down 195, closing at 2230 (-8.0%), despite continued concerns about dry weather in the West African growing areas.
World Cup Trading Championships®
A. Masters, Michael O’Keeffe, and Yuwen Cao maintained their positions in the top three with net returns of 2,872.3%, 936.3%, and 232.2% respectively. Orhan Özcan moved into 4th place with a respectable net return of 166.2%, followed closely by Allen Swiontek’s 164.4% net return.
In the Global Cup, Michael Cook held first place with a 171.5% net return, with Wayne Wan moving to 2nd place at 143.5%. Stefan Seibert moved to 3rd with a net return of 138.9%, followed by Maxim Schulz at 132.9% and Jan Smolen 62.1% respectively.
In the Forex division of the World Cup Trading Championships®, Nicholas Ridley finished the week in first place with a net return of 126.3%, followed by Miguel Garcia at 82%. Andreas Plagge held onto third with a 61.7% net return. Fourth and fifth places were taken by Chien-Hung Chen at 50.3% and Wenchen Zhang at 40.5%.
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