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April 20, 2020, 7:00 a.m. EDT

Coronavirus creates a market of ‘haves and have-nots,’ with the Dow posting its best 2-week run in 82 years amid 22 million job losses

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By Mark DeCambre, MarketWatch

MarketWatch photo illustration/iStockphoto

“It was the best of times, it was the worst of times…it was the spring of hope, it was the winter of despair,” to borrow from the opening lines of Charles Dickens’s “A Tale of Two Cities.”

In this case, the epoch of coronavirus that has infected some 2.2 million people globally has essentially created a tale of two markets: one of Wall St. and the other of Main St.

On Wall St., hope of reopening plans and unvetted therapeutics for the deadly illness has propelled the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.66% to its best two-week run since 1938, according to Dow Jones Market Data.

On Main St., the market for jobs has been decimated, with forced-shutdown protocols, meant to limit the spread of the pathogen, wiping out nearly all of the 23 million jobs created in the aftermath of the 2007-09 recession, in a manner of four, incredibly short weeks.

The disconnect between the two is palpable.

“It took ten years of job growth to pull these workers off the sidelines; now they will be thrown back into the shadow pool,” wrote Bob Schwartz, senior economist at Oxford Economics, in a Friday research report.

Other data this week, beyond jobless claims, have been ugly, including a report on U.S. industrial production which fell 5.4% in March, the steepest decline since early 1946, and retail sales in March registered a record 8.7% slump.

However, economic reports are anticipated to get worse: “As bad as the March data was, the figures for April will be even worse,” Schwartz wrote. “This is the first month that will capture the full impact of Covid-19.”

You wouldn’t know it by looking at Wall St., however. The Dow is up 28% from the point at which it hit its bear-market low point on March 23, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.74% is up 26% and the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.88% is up 25.4% over the same period.

Haves and Have-nots

Within the microcosm of the equity market, another divide is being spotted by investment experts, with health-care, technology, consumer discretionary, communication services and consumer staples outperforming the six other sectors of the S&P 500 index.

‘We simply can’t have half of the market plummeting and expect the leaders to keep spiking.’

Frank Cappelleri, executive director at Instinet

“There has been a clear divide between the Sector ‘haves and have-nots’,” wrote Frank Cappelleri, executive director at Instinet in a Friday research note:

The Haves:

Sector Winners Weekly return 4/13-4/17
Consumer discretionary 7.86%
Health care 6.14%
Information technology 4.79%
Consumer staples 4.18%
Communication Services 4.14%
Source: FactSet

The Have-nots:

Sector losers/underperformers Weekly return 4/13-4/17
Financials -4.03%
Real Estate -2.76%
Materials -2.13%
Utilities -0.49%
Industrials -0.14%
Energy 0.21%
Source: FactSet

In other words, five sectors are leading the market higher, while six have been woefully left behind.

The same goes for themes and style-based investing, including small-cap vs. large-caps and momentum and growth vs. value.

Cappelleri highlights a number of exchange-traded funds, notably the iShares Edge MSCI USA Momentum Factor ETF /zigman2/quotes/201303785/composite MTUM +1.01% , up 6.36% on the week, the Innovator IBD 50 ETF /zigman2/quotes/209435488/composite FFTY +2.29% , up 5.89%, and the iShares Russell 1000 Growth ETF /zigman2/quotes/202261664/composite IWF +0.74% , rising 5.29%, to illustrate the point that the largest companies are levitating the market.

Source: Instinet, LLC, a Nomura Company

So while the Dow, S&P 500 and Nasdaq enjoyed stellar weekly gains of 2.2%, 3% and 6.1%, respectively, the Invesco S&P 500 Equal Weight ETF /zigman2/quotes/202854823/composite RSP +1.05% , which owns all of its holdings in equal measure despite market cap, was up a meager 0.82% on the week.

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