Following the worst weekly unemployment claim report in history, the major indices managed a bounce of more than 2%. Much of the strength was driven by headlines that Russia and Saudi Arabia might cut a deal to cut oil production, which would help to raise prices and forestall some bankruptcies in the sector, but there were few specifics and plenty of obstacles.
On Friday morning, the focus will be on jobs again as the March monthly jobs news is presented. Much of the report is based on data that was gathered more than two weeks ago, so it will fail to reflect the carnage wrought in the last two weeks when nearly 10 million unemployment claims were filed. It will be a poor report, but won't tell us much about what is to come.
At 10 a.m. ET, the ISM-Services number will be presented. This will also fall sharply, but the worst is yet to come. In Europe, a similar metric showed a reading of 26.4 versus 52.6 in February. This was the worst-ever report in history. In Italy, the number was just 17.4% as the only people that were working in the services sector were mostly medically related.
While these economic reports will help market participants to measure the economic damage that is being done, there is still a tremendous amount of uncertainty that is going to prevent the market from reaching a bottom in the near term. Many market participants are anxious to believe that the worst is being priced into this market, but there simply is no way to know that.
There are two major unknowns right now. The first is the progression and severity of the coronavirus and the second is the economic impact of the measures taken to deal with it. Even if we did have a better idea of when the coronavirus might peak, it is tremendously difficult to calculate when economic life might start to return to normal.
There has been a widely held belief that the economy is going to bounce back extremely fast once the coronavirus crisis has peaked, but there is increased concern now that the impact may linger as there is going to be the potential for the coronavirus to flare up again in the future if it is not completely destroyed.
Each time this market bounces, it stirs up hope that the end of the crisis is in sight. It is a natural inclination, but we need to be coldly objective about that sort of thinking. We do not have any factual basis for believing that the market has fully priced in an economic shock unlike anything seen before.
I don't want to sound too negative, as it is inevitable that great opportunities will develop, but I will continue to remind you to stay patient and not be overly anticipatory. There is no need to put precious capital to work into the teeth of a decline. It will take the market weeks and months to recover, and there will be plenty of time to buy when a new bull market develops. The less money you lose now, the better position you will be in when the market does turn.
We have a soft open on the way as we await jobs news at 8.30 a.m. ET.