Overview: The coronavirus continues to remain the focus of investors, and the data released over the past week reflected its negative impact on economic activity. Federal Reserve purchases of mortgage-backed securities continued to keep daily volatility in mortgage markets low, and rates again ended the week with little change.

Two of the most current monthly reports on U.S. economic activity are surveys released by the Institute for Supply Management (ISM), and both posted the anticipated steep declines resulting from the pandemic. The ISM Manufacturing Index fell from 49.1 to 41.5, while the ISM Services Index dropped from 52.5 to 41.8, which was the lowest level since 2009. Readings below 50 indicate a contraction in the sector.

Filings for new jobless claims dropped from 4.4 million last week to 3.8 million this week. Typical readings before the outbreak were around 250,000. The U.S. has lost over 30 million workers, about 19% of the labor force, over the past six weeks.

The Treasury Department announced that, on May 20, it will launch a new 20-year bond to help fund the record level of government borrowing this year, which has been needed for the stimulus relief measures. According to the Treasury, this will be part of an effort to increase the average duration of government debt.

Week Ahead

Looking ahead, investors will continue watching for news about medical advances to fight the pandemic, Fed actions, government fiscal stimulus programs, and plans for gradually reopening the economy. In addition, the monthly Employment Report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation will provide valuable information on labor market conditions. The Consumer Price Index (CPI) will come out on May 12. CPI is a widely followed monthly inflation report that looks at the price change for goods and services.

ISM Services Index