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Capital Market Implications

Last week, as the Chinese economy continued to be negatively impacted by the Coronavirus, the likelihood of a pickup in global growth remained uncertain.  US growth however has yet to experience any major repercussions from the virus outbreak.  During January and February, consumer confidence and business optimism at home remained high and, while retail sales in January moderated, they were positive.  Additionally, inflation gauges last month suggested inflationary pressures continued to ebb.  On the other hand, the manufacturing sector contracted again in January, although an important regional survey rebounded in February suggesting the slowdown in the sector may be diminishing.

Last week, investors once again focused less on the Coronavirus headlines and more on the fundamentals and thus stocks rose.  For the week overall, the S&P 500 Index increased 1.6% and the Dow Jones Industrial Average gained 1.2%.  All sectors of the market participated, with real estate and utilities increasing the most, up 4.9% and 2.6%, respectively.  International markets were less fortunate, as developed foreign markets ended the week flat while emerging markets climbed 1.4%.  Interest rates remained relatively unchanged last week, as shorter dated yields increased while longer dated yields declined.  Therefore, for the week overall, the Barclay’s US Aggregate Index, US corporate bonds and 10-year municipals bonds all ended relatively unchanged.  High yield bonds on the other hand rallied along with stocks and gained 0.5% on the week.   

Week of February 10-14, 2020

Weekly Macro Updates

Initial Jobless Claims (Feb 8) 210k est., 205k actual, 203k prior
Continuing Claims (Feb 1) 1734k est., 1698k actual, 1759k prior
NFIB Small Business Optimism (Jan)  103.5 est., 104.3 actual, 102.7 prior
Empire Manufacturing (Feb)  5.0 est., 12.9 actual, 4.8 prior
CPI Ex Food & Energy YoY (Jan)  2.2% est., 2.3% actual, 2.3% prior
Real Avg Hourly Earning YoY (Jan) 0.6% actual, 0.7% prior: R+
NAHB Housing Market Index (Feb) 75 est., 74 actual, 75 prior
Export Price Index YoY (Jan)  -0.2% est., 0.5% actual, -0.9% prior: R-D13
Retail Sales Advance MoM (Jan) 0.3% est., 0.3% actual, 0.2% prior: R-
Retail Sales Control Group (Jan) 0.3% est., 0.0% actual, 0.2% prior: R-
Industrial Production MoM (Jan)  -0.2% est., -0.3% actual, -0.4% prior: R-
University of Michigan Sentiment Index (Feb P) 99.5 est., 100.9 actual, 99.8 prior
University of Michigan Expectations (Feb P)  90.0 est., 92.6 actual, 90.5 prior

 

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Directional change based on general
long-term tends.