Week in Review 2.24.2020
February 24, 2020
Week in Review
Week Ending: Friday, February 21, 2020
Recap & Commentary
U.S. equity markets ended the week lower as the S&P 500, Nasdaq, and Dow Jones Industrial Average pulled back after hitting record highs last week. The S&P posted its first weekly decline since January, while the 30-Year Treasury yield hit an all-time low amidst Friday’s PMI report signaling the first contraction of U.S. business activity since 2013. Tech stocks took a hit as Apple announced that sales will likely miss forecasts due to coronavirus concerns and more specifically, supply chain disruptions. Treasuries and Gold both hit seven-year highs as investors sought safe havens from the turbulent equity markets.As of Friday, the World Health Organization had reported 77,000 cases of coronavirus and over 2,200 deaths. A spike in infections outside of China made investors doubt the containment of the virus. Further, China announced that cases diagnosed with a CT scan are no longer eligible for inclusion in its reported numbers, raising questions about the reliability of data coming out of the Hubei province, and actual magnitude of the situation.
Abroad, equity markets in multiple Asian countries declined, while Germany, whose economy depends largely on their trade surplus, saw export orders plunge. The Australian dollar hit its lowest point since the Financial Crisis following an unexpected jump in unemployment. Oil hit a four-week high as fears of decreased demand stemming from the coronavirus eased slightly.
Through Friday, 435 S&P 500 companies had reported fourth quarter earnings. So far, 70% of companies have beaten their earnings estimate. Fourth quarter earnings growth is currently forecasted to be 0.9%.
Economic Bullet Points
The Conference Board’s Leading Economic Index (LEI) rebounded 0.8% in January, the most since October 2017. Over the past six months, the LEI edged up 0.1%, a modest uptick after three straight negative readings, but still near the slowest rate of change since mid-2016, as growth momentum remains subdued. Similarly, the LEI gained 0.9% y/y, a modest improvement over the 0.1% y/y rate in the prior month, but well below the average 2.2% gain per annum historically.Producer Price Index (PPI) increased 0.5% in January, the most since October 2018, led by much stronger wholesale and retail trade margins. On a y/y basis, PPI rose 2.1%, double the pace from three months ago, while core PPI increased 1.7%.
Existing Home Sales fell -1.3% in January, a three-month low, but better than the consensus of a -2.0% decline. Despite the pullback to start the year, existing home sales were up 9.6% y/y, with housing demand supported by low mortgage rates, continued labor market strength, and more household formations.
Housing Starts slipped -3.6% in January, its first decline in four months. On a y/y basis, housing starts were up 21.4%, its highest level since December 2007.
Market Indices Week of 2/21
|U.S. Bond Market||0.3%|
|10-Year Treas. Yield||1.47%|
|WTI Oil ($/bl)||$53|
The Week Ahead
- Leading Indicators
- Producer Price Index
- Existing Home Sales
- Housing Starts