Weekly market update
Despite Friday’s sharp selloff on continued coronavirus concerns, stocks still finished in positive territory for the week. The Dow rose 3.06%, the S&P 500 rose 3.21% and the big winner for the week was the NASDAQ which rose 4.09%. This is a market where if you declared it was World War III, they would rally on reconstruction.
Stocks generally rose all week as the number of coronavirus cases and deaths continued to climb, but traders and investors didn’t seem to care after some good earnings and solid economic data. Also adding to the positive tone for stocks last week was China’s announcement that they were cutting tariffs and news that a cure may not be too far off for the virus.
The last two Fridays have seen sharp declines in the major averages because traders, investors and hedge fund managers were reluctant to be too long in the market going into the weekend. There was the potential of the coronavirus numbers of infections and death to spiral out of control, which they did this past weekend.
On the earnings front, we had 322 of the S&P 500 to report and so far, sales growth has been a shade better than 3% and earnings growth has only risen 0.5%. Still, this is better than the negative growth expectations of many analysts coming into 2020.
U.S. Treasury yields rose from 1.50% the prior week to north of 1.67% by last week before doing an about-face and ending the week at 1.59%. Part of the reason is investors seeking safe-haven assets and part due to the fact this virus could potentially be a big drag on global growth. And with basically China cut off from the rest of the world and factories extending the lunar holiday out one, two and in some cases 3 more weeks, you can imagine how that is going to impact the growth story.
U.S. economic data continued to be strong with manufacturing and services continuing to show improvement, factory orders and durable goods orders were also better than expected. The January U.S. unemployment rate inched up to 3.6% and non-farm payrolls added another 225,000 more jobs topping expectations of around 160,000.
This week will be yet another busy week for U.S. earnings and we will also get the latest read on inflation with the CPI and PPI. We will also get the latest read on consumer sentiment and retail sales. I’ll be paying particular attention to that retail sales number, especially with more and more cases of the virus being reported. Despite the sharp rally last week, I don’t think we are out of the woods with this virus just yet, so we’ll be monitoring the markets very closely and will keep you posted.
Make it a great week.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
