Has the Market Focous Shifted?

Trump's desire to begin unwinding the US shutdown by Easter (or more likely soon thereafter) has shifted the market focus somewhat regarding the coronavirus.  Rather than trading just on the idea that the virus' impact will be long and deep, the markets are now also looking for evidence that support a decision to pull back from the work/business restrictions that have been put in place.  Along these lines, Trump said officials will be discussing ways to reboot the economy.  And, he will probably bring them up at his daily news conferences this week. This week's economic data will be weak, however.   While they may be discounted, at least for now, as temporary or already known, the juxtaposition of evidence of the currently bad situation against assertions of hopefully better times soon could result in further market volatility. 

Such discounting of weak US economic data already was seen last week, as stocks rallied despite weak underlying Durable Goods Orders and the surge in Initial Claims.  News commentators attributed the rally to the passage of the stimulus bill.  But, that is probably not the only reason.  The bill helps cushion companies and workers from the economy's shutdown, so it just a band aid.  Ford's announcement of a re-opening of several plants in the first half of April may be a harbinger of other companies' re-openings.  So, it may have been another catalyst of Thursday's rally. 

The most important development that would support the start of a return to normalcy is evidence that a cure for the disease has been found.  A cure would allay fears of returning to work as well as buy time to come up with a vaccine.  With NYC and other locales presumably now testing the effectiveness of the combination of chloroquine and Zpac, as well as other medicines, such evidence -- either supportive or not -- should be available soon.

This week's US economic data should be weak, but may not show the full extent of the work stoppage.   Consensus looks for a drop in the March Mfg ISM to 45.0 from 50.1 in February.  But, virus-related supply disruptions could boost the Supplier Delivery component, holding up the Mfg ISM for the wrong reason (because of disruptions, not capacity constraints).  Consensus expects -100k for March Total Nonfarm Payrolls and -175k for Private Payrolls (Total less government jobs).  While Initial Claims jumped to 3.2 Mn in the latest week, it was for the week after the March Payroll Survey Week.  So, it is possible that most of the newly laid off people worked part of the Survey Week.  In this case, they would be included as employed in the Payroll data.  Their partial workweek would depress the Nonfarm Average Workweek, however.  Consensus looks for a drop to 34.1 Hours from 34.4 Hours in February.  This would point to a further large decline in April Payrolls.

The most important economic data may be the March Chinese Caixin Mfg PMI, because it could confirm anecdotal evidence that the Chinese economy is beginning to recover from the effects of the coronavirus.  From a US perspective, supply disruptions could be easing and sales in China could begin to grow again.  Consensus looks for an increase to 45.6 from 40.3 in February.  It will be released late Tuesday.  Similarly, the Caixin Services PMI could be important.  It is due late Thursday.   It was 26.5 in February.