As the economic data continues to pile in, much of it is showing some of the largest drops ever. Not surprisingly, small businesses are also suffering, as the NFIB Small Business Survey for April dropped significantly for the second consecutive month, but there were some silver linings. For starters, it wasn’t anywhere near as low as it was during the financial crisis; also, it came in better than what economists expected and didn’t drop as much as it did the previous month.

“The bedrock of the US economy is small businesses, as they employ about half of the US workforce,” explained LPL Financial Chief Inv

Index Performance – Week ending 5/15/2020

S&P 500:  -2.26%
Dow Jones Industrial Average:  -2.65%
Nasdaq Composite:  -1.17%

Equities

US equities sold off modestly this week. The growth-heavy Nasdaq outperformed among US benchmark indexes, while the small cap Russell 2000 Index dropped more than 5%.  Investors looked to take profits as the first wave of states began the reopening process.  Questions remain surrounding how quickly activity may return to normalized levels. Early-opening states have not seen a noticeable increase in new cases, though concerns about a second wave in China

Retail sales numbers for April were released today, and the basic story was no surprise. Retail sales fell a record 16.4% in April, after declining 8.4% in March, already the largest decline since the government started keeping records in 1992.

The year-over-year decline of more than -21.6% has already topped the -11.5% seen during depths of the financial crisis, as shown in the accompanying chart. But there are hints that the decline has been heavily influenced by store closures rather than shoppers tightening their belts, and that might bode well for the future as the economy gradually starts to open up.

As we discussed in earlier this week in Markets Due for a Pause, there were multiple technical reasons to believe that US equities were due for some sort a pullback following a more than 30% rally from the March 23 lows. Technical resistance near the 2935 level for the S&P 500 Index, declining participation, and seasonal headwinds all suggested a near-term downward bias.

On Tuesday and Wednesday, the S&P 500 pulled back more than 3.5%, and closed below its 20-day moving average for the first time since April 3. So where do we go from here?

We would first state that our base case is not for a full retest of th