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  • February 10, 2020

Week in Review

Week Ending: Friday, February 7, 2020

Recap & Commentary

U.S. equity markets ended the week higher despite growing coronavirus concerns. Bond markets fell and Treasury yields inched higher as investor confidence remained strong amidst reports of additional Chinese central bank support, increased efforts to contain the virus, and strong corporate earning reports. Emerging markets also benefited from a surprise announcement by China that it intends to cut tariffs on U.S. imports.

As of Friday, the World Health Organization had reported nearly 32,000 cases of coronavirus and over 630 deaths. Following outbreaks of the virus on two different cruise ships, Japan and Hong Kong closed their ports to entry. In attempt to minimize the economic impact from the virus, The People’s Bank of China announced it was considering lowering reserve requirements and lending rates. Chinese demand for crude oil tanked amid the crisis sending oil prices below $50 a barrel on Tuesday. Toyota and Honda have implemented temporary work stoppages in their Chinese factories and Macau closed all of their casinos.

In politics this week, Iowa kicked off the Democratic caucus season but not without issue when data discrepancies delayed results and ultimately led the Democratic National Committee to call for a complete recount. President Trump’s impeachment trial concluded on Wednesday when the Senate acquitted him on all charges.
Through Friday, 320 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 0.7%.

Economic Bullet Points

US Employment—Nonfarm payrolls rose by 225K in January, well above the consensus of 158K. Additionally, the prior two months were revised up by 7K. The unemployment rate rounded up to 3.6%, above the consensus, as more people joined the labor force. Average hourly earnings growth accelerated to 3.1% from an upwardly revised 3.0%. Despite its strength, the report does not change the outlook for monetary policy, which remains on hold.

US Manufacturing—The ISM Manufacturing Index rebounded 3.1 points in January, the most since July 2013, to 50.9, as factory activity expanded for the first time in six months. The consensus was for a smaller 0.7-point gain to 48.5.

Factory Orders rebounded 1.8% in December, the most since August 2018, and above the 1.4% estimate. The main driver was a surge in defense orders.
US Services—The ISM Non-Manufacturing Index increased 0.6 points in January to 55.5, a five-month high, and above the consensus of 55.0, indicating faster growth in US services activity.

Trade Balance—The trade deficit widened by $5.2 billion in December to $48.9 billion, a three-month high, and slightly above the consensus of $48.3 billion. For all of 2019, the trade deficit shrank 1.7% to $616.8 billion, its first annual decline since 2013.

Of Note

The Federal Communications Commission launched a $20B initiative to provide funding to broadband and cable providers who are working to bring internet to rural areas.

Market Indices Week of 2/7

S&P 5003.1%
Small Caps2.6%
Intl. Developed1.9%
Intl. Emerging2.8%
Commodities-0.1%
U.S. Bond Market-0.4%
10-Year Treas. Yield1.58%
US Dollar1.3%
WTI Oil ($/bl)$50
Gold ($/oz)$1,570

The Week Ahead

  • Consumer Price Index
  • Retail Sales
  • Industrial Production
  • Small Business Optimism

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