Market and Economic Commentary - Week Ending 02/07/2020
Market and Economic Commentary - Week Ending 02/07/2020
Global stock markets rebounded last week after posting declines for the prior two weeks.
Returns in the Markets for the week ending 02/07/2020 were as follows:
US Major Market Indexes (The first number is each category in the 1-week performance. The second number is the year-to-date performance)
Dow Jones 30 Industrial Average (+3.00%, +1.98%). S&P 500 (+3.17%, +3.00%). NASDAQ Index (+4.04%, +6.11%). US Small-Cap Index (+2.73%, -0.62%). CBOE Volatility Index (VIX), or Fear Gage, (-17.89%, +12.26).
US Sector ETFs (The first number is each category in the 1-week performance. The second number is the year-to-date performance)
Communication Services (+3.62%, +4.16%). Consumer Discretionary (+2.39%, +2.30%). Consumer Staples (+1.714%, +2.03%%). Energy (+1.01%, -10.09%). Financial (+3.20%, +0.45%%). Health Care (+3.93%, +1.16%%). Industrials (+3.93%, +2.68%). Materials (+4.27%, -2.17%). Real Estate (+1.61%, +3.28%). Technology (+4.57%, +8.75%). Utilities (-0.57%, +6.14%).
Global Market ETFs (The first number is each category in the 1-week performance. The second number is the year-to-date performance)
ACWI all-country World index (+2.91%, +1.43%). ACWX all-country World index ex US (+2.28%, -1.22%). AAXJ all-country Asia ex Japan (+3.67%, -2.86%). EWJ Japan (+2.98%, +0.39%). EZU Eurozone (+2.84%, -0.69%). ILF Latin America 40 Index (+1.34%, -6.62%). EEM Emerging Markets (+2.97%, -3.37%).
Commodities ETFs (The first number is each category in the 1-week performance. The second number is the year-to-date performance)
DBC Commodity Tracking Index (-0.34%, -8.90%). DBA Commodities Agriculture (+1.21%. -4.35%). USO United States Oil (-2.40%, -17.41%). DBB (Base Metals (-0.21%, --5.62%). IAU Gold (-1.12% +3.45%). BDRY Dry Bulk Shipping (-6.06%, -40.29%).
Bond Market
In the bond market, the 10-year US Treasury interest rate went from 1.505% on January 31 to 1.582 on February 7, for a percentage increase of 5.11% for the week.
Currencies
In currencies, the US Dollar DXY Index went from 97.21 on January 31 to 98.59 on February 7.
Other Significant Events
US Stocks Retreat on Friday Amid Coronavirus Concerns
Wall Street closed in the red, as reignited coronavirus fears outweighed strong employment creation in the US. On Friday, the key macro headline was that the US economy added 225 thousand jobs in January, easily beating expectations of 158 thousand, while the unemployment rate edged up to 3.6% from 3.5% higher labor force participation. Meanwhile, on the coronavirus front, China’s National Health Commission confirmed 31,131 cases of the deadly virus and 636 deaths, triggering concerns that the Chinese economy will slow down further.
European Stocks End Lower on Weak Data
Stock markets across Europe closed in the red on Friday amid growing concerns about the economic outlook for the Eurozone, after data showed German industrial production tumbled 3.5% in December, the biggest drop since January 2009, while French industrial output fell more sharply than expected. In addition, fears that the coronavirus outbreak might weigh heavily on global growth overshadowed a strong US jobs report. The DAX 30 lost 61 points or 0.5%; the FTSE 100 fell 38 points or 0.5%; the CAC 40 edged down 8 points or 0.1%; while the IBEX 35 and FTSE MIB finished near the flat line.
Nonfarm Payrolls Beat Forecasts
Nonfarm payrolls in the US increased by 225 thousand in January of 2020, following an upwardly revised 147 thousand rise in the previous month and beating market expectations of 160 thousand. Notable job gains occurred in construction, in health care, and in transportation and warehousing. The change in total nonfarm payroll employment for November was revised up by 5,000 from +256,000 to +261,000, and the change for December was revised up by 2,000 from +145,000 to +147,000. With these revisions, employment gains in November and December combined were 7,000 higher than previously reported. Annual revisions showed payroll employment rose by 2.096 million in 2019, the least since 2011, barely in line with the previous release. 2018 data was revised lower to 2.314 million from 2.68 million.
US Consumer Credit Grows Above Expectations
Consumer credit in the United States went up by $22.1 billion in December 2019, up from a downwardly revised $11.8 billion gain in November and above market expectations of a $15 billion rise. Revolving credit including credit card borrowing climbed $12.7 billion, following a $3 billion decline in November. Meanwhile, non-revolving credit including loans for education and automobiles rose $9.4 billion, losing steam from a $13.3 billion advance in the prior month.
Baltic Index Falls to Near 4-Year Low
The Baltic index, which tracks freight rates for world’s largest cargo ships, sank to the lowest level since March 2016 in early February, with the capsize segment falling to an all-time low amid weak demand for ships and muted activity in China as the coronavirus outbreak deepened. The dry bulk index has plunged around 83 percent after touching a multi-year high of 2,518 points last September.
China Update
Investors react to the coronavirus outbreak that has claimed 361 lives in China so far and affected over nearly 17000. To calm the market and support the economy, the PBoC unexpectedly lowered the interest rates on reverse repos by 10 bps. The 7-day reverse repo rate was cut to 2.4% from 2.5% previously, and the 14-day tenor to 2.55% from 2.65%. Policymakers also pledged to inject CNY 1.2 trillion into money markets through reverse bond repurchase agreements. The measure aims to maintain the liquidity of the banking system and the stability of the monetary market, the bank said on a statement on its website Markets in China were closed from January 24th for the regular Lunar New Year Holiday but this year the government extended it by 3 days in an attempt to contain the spread of the virus.
Week Ahead
The US will publish inflation, retail sales and industrial output data in the coming week, while the Fed Chair Powell testimony before Congress and quarterly earnings reports from almost 500 companies will also attract attention. Elsewhere, important data to follow include GDP numbers for the UK and Germany, consumer and producer prices for China, industrial output, inflation and trade balance for India, and business and consumer morale for Australia. Central banks in Mexico and New Zealand will be deciding on monetary policy, while the European Commission will publish its Winter Economic Forecast.
Thank you and please stay tuned for more upcoming reports.
Be sure to visit my website to subscribe and ask for a free copy of the "Bull Valley Advisor" stock market newsletter:
You can also subscribe and listen to my podcasts on Anchor at:
You can also subscribe and listen to my podcasts on Google Podcasts, Apple Podcasts, Breaker, Radio Public and Spotify.
Len Martinez is a Financial Consultant. Information in the "Bull Valley Advisor” newsletter should not be considered as investment advice or an offer to buy or sell securities. Data is derived from sources considered to be reliable including Morningstar, StockCharts.com, YAHOO Finance, FINVIZ, TipRanks, Investing.com, ECRI, OCED, gurufocus, Crestmont Research, Trading Economics and S2O. Results are not guaranteed. Len Martinez is not an RIA. The data is shown for informational purposes and should not be considered investment advice or an offer to buy or sell securities.
Comments
Post a Comment