Hero Banner
Capital Market Implications

Although–due to the proliferation of the coronavirus–the outlook for the global economy continued to deteriorate last week, domestic economic reports remained sanguine.  The housing market demonstrated strength in January, as housing prices climbed, mortgage rates fell and personal incomes rose.  As such, both new home sales and pending home sales during the month rose sharply.  Additionally, in spite of manufacturing remaining depressed abroad, durable goods and capital goods orders here at home increased more than expected in January, rising 0.9% and 1.1% for the month, respectively.  Regional Federal Reserve manufacturing indexes however were mixed, as manufacturing in the Kansas City district expanded but Richmond’s index contracted.

There is no other way to put it, last week’s action in global stock markets was just plain ugly. No one was spared from the coronavirus carnage, as markets both at home and abroad suffered their worst downturn since the great financial crisis.  By Friday’s close, the S&P 500 Index had plummeted -11.4% while the Dow Jones Industrial Average plunged -12.3%.  Every sector of the S&P 500 fell, with energy suffering the most, having cratered -15.4% for the week.  Given developed foreign markets lost -9.6% and emerging markets sank -7.2%, international markets were the week’s relative outperformers.  As investors continued to seek sanctuary in bonds last week, 10-year Treasury yields fell to their lowest level on record (which sent bond prices soaring).  For the week overall, the Barclay’s US Aggregate Index climbed 1.3%, US corporate bonds gained 0.5% and 10-year municipals bonds rose 0.7%.  High yield bonds on the other hand traded in sympathy with stocks and ended the week off -2.6%.   

Weekly Macro Updates

Initial Jobless Claims (Feb 22)  212k est., 219k actual, 211k prior
Continuing Claims (Feb 15)  1711k est., 1724k actual, 1733k prior
FHFA House Price Index MoM (Dec)  0.4% est., 0.6% actual, 0.3% prior: R+
S&P CoreLogic CS 20-City Y0Y (Dec)  2.85% est., 2.85% actual, 2.54% prior
Conference Board Consumer Confidence (Feb) 132.2 est., 130.7 actual, 130.4 prior
Richmond Federal Reserve Manufacturing Index (Feb) 10 est., -2 actual, 20 prior
Kansas City Federal Reserve Manufacturing Activity (Feb) -1 est., 5 actual, -1 prior
New Home Sales MoM (Jan)  3.5% est., 7.9% actual, 2.3% prior
ISM Manufacturing (Feb)  50.5 est., 50.1 actual, 50.9 prior
Durable Goods Orders Ex Transportation (Jan P)  0.2% est., 0.9% actual, 0.1% prior: R+
Capital Goods Orders Nondefense Ex Air (Jan P)  0.1% est., 1.1% actual, -0.5% prior: R+
Pending Home Sales NSA YoY (Jan)  2.1% est., 6.7% actual, 6.8% prior
Personal Income (Jan) 0.4% est., 0.6% actual, 0.1% prior: R-
Real Personal Spending (Jan) 0.2% est., 0.1% actual, 0.1% 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.