Most economic releases last week remained healthy, but evidence of the impact from the Coronavirus on the economy did emerge. Empire manufacturing fell 34.4 points in March from its level in February indicating a sharp drop-off in manufacturing activity in the state of New York. Additionally, although unemployment claims remained near a multi-decade low in early March, the volume of restaurants and bars that are now closing will drive those claims up exponentially in the coming weeks. The economic contraction that will be felt from the need to curtail the virus will not be felt in the first quarter, which will be positive. The economic downturn however in the upcoming quarter is likely to be severe.
As implications from COVID-19 took hold last week, market action was reminiscent of the great financial crisis of 2008. For the week, the S&P 500 Index sank -8.7% while the Dow Jones Industrial Average plunged -10.2%. No sector of the market was spared, as technology fell the least at -5.2% and energy the worst - off a stunning -24.1%. Developed foreign markets also suffered, tumbling -18.4% for the week while emerging markets held in a bit better down only -11.9%. Credit markets were not spared either as concerns of potential delinquencies rose. For the week overall, the Barclay’s US Aggregate bond index fell -3.2%, US corporate bonds declined -7.2% and 10-year municipal bonds slumped -4.3%. High yield bonds sank as well, off -7.1% for the week.