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Week in Review 3/6/2020

Week in Review

Week Ending: Friday, March 6, 2020

Recap & Commentary

U.S. equity markets were rocked by volatility this week as the Dow posted an 800-point drop sandwiched between two days of 1,100-point gains. The S&P rallied in the last half-hour of trading, gaining on last week’s close. Investors continued to pour into treasuries and gold, sending the 10-Year Treasury yield below 0.7% for the first time. Global unease about coronavirus continue to impact markets and demand despite some central banks announcing rate cuts and US Congress approving an $8B expenditure to combat the virus.
As of Friday, the World Health Organization had reported 102,000 cases of coronavirus globally and over 3,400 deaths. The virus has now spread to every continent with the exception of Antarctica. Cities began to cancel music festivals, conferences, and move university courses online after California saw a spike of infections and New York cases doubled overnight. Supply issues with test kits in the US, coupled with the two-week incubation period, are causing worry about how many people actually have the virus but are untested.
Oil had a volatile week as Saudi Arabia and Russia quarreled over whether larger production cuts are necessary in order to offset decreased demand. US oil fell 10% after Russia announced that it would not sign OPEC’s plan to cut crude production, marking its worst one-day drop since 2014.
Through Friday, 98% of S&P 500 companies had reported fourth quarter earnings. 70% of companies have beaten their earnings estimate and 64% have beaten their revenue estimates. Over the course of the week, the projected earnings growth changed to an estimated earnings decline of -0.1%.

Economic Bullet Points

ISM Manufacturing dipped to 50.1 from the last reading of 50.9. Many companies’ supply chains have been impacted by the virus, thus slowing manufacturing.
ISM Services rose to 57.3 from 55.5, beating analyst estimates of 54.8. This reading indicates the fastest growth of the US service sector in one year as 16 of the 18 industries covered in the index expanded in February. However, this growth slowed towards the end of the month as tourism decreased due to coronavirus concerns.
Nonfarm Productivity released from the fourth quarter was trimmed from 1.4% to 1.2%. Unit labor costs and increase in output were both revised downwards from estimates while hours worked was revised upward slightly. The addition of these fourth quarter figures shows US productivity up 1.8% in the last year.
Factory Orders slipped 0.5% in January, more than analyst estimates.
Feb. Employment Report showed the US added 273,000 jobs last month. The unemployment rate fell to 3.5%.
Trade Deficit decreased $3.3 billion in January to $45.3 billion.

Of Note

Amazon has removed tens of thousands of third-party items from its website due to price gouging. Recently a container of Clorox wipes was listed on the website for $20.99, and a two-pack of 12oz hand sanitizer was listed at $99.95. Ebay and Facebook are also taking steps to remove items with unreasonably high prices from their respective marketplaces.
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Market Indices Week of 3/06

S&P 5000.6%
Small Caps-1.9%
Intl. Developed0.3%
Intl. Emerging0.7%
Commodities-0.3%
U.S. Bond Market0.8%
10-Year Treas. Yield0.77%
US Dollar2.2%
WTI Oil ($/bl)$42
Gold ($/oz)$1,674

The Week Ahead

  • Small Business Optimism
  • Inflation (CPI and PPI)
  • Consumer Sentiment
  • Import & Export Prices

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