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The Covid-19 recession is having predictable effects on stock market indices, as the main North American gauges faded after a short-lived rally this week. The unemployment picture in Canada, with 1 million jobs lost in March and an unemployment rate at 7.8%, is likely to worsen in April as the full extent of the national economic lockdown takes effect. In the U.S. applications for unemployment benefits spiked to over 26 million last week, and the unemployment rate is expected to climb to more than 15%.
The U.S. Congress passed a small business aid package amounting to US$464 billion (bringing total U.S. government relief to well over $2 trillion), helping support stock indices somewhat through the week. However, sentiment soured on weak first-quarter earnings reports and absence of guidance (presaging an even worse second quarter). A 4.1% recovery in crude oil prices on Friday helped mitigate the downtrend towards the end of the week.
The S&P 500 Composite Index lost 1.3% on the week, while the Nasdaq Composite Index edged down 0.2%. Toronto’s S&P/TSX Composite Index closed Friday with a 0.4% gain on the week, supported by a weekly gain in the price of West Texas Intermediate crude oil on Friday, even though oil lost 5.2% on the week overall. Gold, meanwhile, gained 1.7% on the week, and is up 12.5% year to date, showing strength on its safe-haven status.
FUND NEWS AND UPDATES
* Horizons re-sets objectives for leveraged crude oil ETFs. Following cease-trading orders by regulators on its leveraged BetaPro Crude Oil 2x Daily Bull ETF (TSX: HOU) and BetaPro Crude Oil -2x Daily Bear ETF (TSX: HOD) last week, Horizons ETFs Management announced on April 22 that it no longer expects HOU or HOD to meet their stated investment objectives. It also announced temporarily re-stated objectives for the two funds, as nearby crude oil futures contracts dipped into negative territory for the first time ever.
Effective April 22, the daily performance of HOU will aim to correspond to one-times the daily performance of its underlying exposure instead of two times. Likewise, HOD will aim for one-times the inverse (opposite) daily performance of its underlying exposure.
The company said that 100% of the underlying exposure of the ETFs will roll to the July secondary futures contract, subsequently rolling into the secondary futures contract on the tenth trading day of the primary futures contract. Future anticipated roll dates and applicable futures contracts will be announced in due course.
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