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Week In Review 2.18.2020

Week in Review

Week Ending: 2/14/2020

Recap & Commentary

U.S. equity markets ended the week higher again as the S&P, Nasdaq Composite, Dow Jones Industrial Average, and ACWI hit record highs. The S&P logged its second consecutive weekly gain while bonds slipped amidst positive earnings results and “manageable uncertainty” about coronavirus impacts. Equity indices in Shanghai and Hong Kong rose above other Asia Pacific benchmarks as hundreds of thousands of workers returned to work this week in China. The People’s Bank of China also announced reverse-repurchase agreements in an attempt to maintain liquidity which boosted Chinese equities and favorably impacted investor sentiment.

As of Friday, the World Health Organization had reported 64,000 cases of coronavirus and over 1,400 deaths. Nearly 35% of scheduled flights in and out of China were cancelled in the last 20 days and a cruise ship with confirmed cases aboard that had been stranded at sea for over two weeks was finally admitted into a port in Cambodia. Reports out of the Hubei province did indicate, however, that rates of infection had slowed.

The Euro fell earlier this week as Angela Merkel’s succession plan collapsed. The British Pound also appreciated in response to chancellor Javid resigning amidst Boris Johnson’s cabinet reshuffling. Oil saw a modest comeback after weeks of stagnant pricing despite OPEC cutting forecasts for global demand.

Through Friday, 385 S&P 500 companies had reported fourth quarter earnings. So far, 71% of companies have beaten their earnings estimate. Fourth quarter earnings growth is currently forecasted to be 0.9%.

Economic Bullet Points

Consumer Price Index (CPI) edged up 0.1% in January, below the consensus of 0.2%. Core CPI, which excludes food and energy, increased 0.2%, matching the consensus. On a y/y basis, the CPI increased 2.5%, the most since October 2018, while core CPI rose 2.3%. In sum, the report shows that CPI remains subdued, supporting a continued easy monetary policy stance from the Fed.

Retail Sales increased by 0.3% in January, matching the consensus. On a three-month average basis, sales were up a steady 0.2%, but slower than the pace in mid-2019. On a y/y basis, retail sales were up 4.4%, the most since October 2018. Overall, the outlook remains positive, supported by a healthy consumer.

Industrial Production fell 0.3% in January, down in four of the past five months, and matching the consensus. Manufacturing output, which is about 3/4 of industrial production, slipped 0.1%, primarily due to Boeing cutting back production. On a y/y basis, industrial production was down 0.8%, declining for the fifth straight month. Core production was down a steeper 1.1% y/y. Both reflect the outsized impact that a troubled Boeing is having on the overall sector.

Of Note

The Federal Trade Commission ordered the five largest tech companies (Alphabet, Amazon, Apple, Facebook, and Microsoft) to allow the FTC access to the details of their acquisitions from the past 10 years. FTC investigators are launching an inquiry into whether these companies’ acquisitions stifle competition.
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Market Indices

Market Indices (As of 02/14)

S&P 500 1.5%

Small Caps 1.9%

Intl. Developed 0.0%

Intl. Emerging 1.4%

Commodities 0.8%

U.S. Bond Market -0.1%

10-Year Treas. Yield 1.59%

U.S. Dollar 0.4%

WTI Oil ($/bl) $52

Gold ($/oz) $1,582

The Week Ahead

  • Leading Indicators
  • Producer Price Index
  • Existing Home Sales
  • Housing Starts

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