ND&S Weekly Commentary 2.10.20 – Coronavirus Takes a Backseat

February 10, 2020

Equity markets pushed aside fears from the coronavirus last week as better-than-expected U.S. job growth and strong manufacturing data provided the boost the markets needed. We would suggest some caution as the full impact of the virus is not yet fully known, but the Chinese government did indicate that the pace of new infections has slowed. With a significant percentage of industrial production shut down, global supply chains are still adjusting from the ripple effects of the virus.

For the week, the DJIA advanced 3.1%, while the broader-based S&P 500 finished at 3.2%. The tech-heavy NASDAQ surged 4.1% and international markets were slightly weaker with the MSCI EAFE and MSCI EM up 1.9% and 2.8%, respectively. The 10 year US Treasury yield rebounded to 1.59% after falling to 1.51% last week. Gold dropped back to $1,570 an ounce and Oil (WTI) closed at $50.35 a barrel.

Economic data on the week was quite strong. The Institute of Supply Management (ISM) reported that the manufacturing purchasing manager’s index (PMI) for January advanced to 50.9%. The release greatly exceeded expectations of 48.5% and indicated the first expansion in 6 months. The non-manufacturing index which tracks the service sector came in at 55.5% beating estimates. On Friday, the Department of Labor reported that 225,000 jobs were added in January which handily beat the consensus estimate of 155,000. The unemployment rate ticked up to 3.6% from 3.5% the month prior. The increase was driven by labor force participation which increased to 63.4%. Average hourly earnings have increased 3.1% from a year earlier.

Approximately, 65% of the S&P 500 constituents have reported earnings for Q4 2019. Blended earnings for the S&P 500 is showing a modest year-over-year increase while revenues are up 3.4% compared to the same quarter a year ago, according to FactSet Research. Expectations were for a 2.0% decline in earnings-per-share (EPS). This week, 101 companies comprising the S&P 500 are scheduled to report.

Let’s make it another good week!

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