Market Insights 2/8/2019

U.S. equities bounced off their lows of the day to finish mixed, with gains in the technology sector powering the Nasdaq and S&P 500 Index back into positive territory.

Treasury yields were lower amid an empty economic calendar and the U.S. dollar was slightly higher, while gold and crude oil prices finished to the upside.

The Markets…

The Dow Jones Industrial Average fell 63 points (0.3%) to 25,106

The S&P 500 Index gained 2 points (0.1%) to 2,708

The Nasdaq Composite added 10 points (0.1%) to 7,298

In moderate volume, 832 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil inched $0.08 higher to $52.72 per barrel and wholesale gasoline rose $0.02 to $1.45 per gallon

The Bloomberg gold spot price increased $4.39 to $1,317.84 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.1% at 96.63

Markets were higher for the week, as the DJIA increased 0.2%, the S&P 500 Index gained 0.1%, and the Nasdaq Composite advanced 0.5%

Treasuries higher as economic calendar empty

Treasuries were higher amid a dormant economic calendar, as the yield on the 2-year note ticked 1 basis point (bp) lower to 2.47%, the yield on the 10-year note lost 3 bps to 2.63%, and the 30-year bond rate fell 2 bps to 2.97%.

The U.S. stock markets pulled back somewhat over the past couple of sessions, with volatility remaining low amid the backdrop of depressed inflation and as global central banks look to be becoming more dovish and slowing down on the path to normalization. Further, global economic growth continues to show signs of weakness and earnings season has been mixed as Congress has yet to pass another short-term spending bill to prevent a second government shutdown this year.

Europe lower as regional growth concerns persist, Asia lower

European equities finished lower, with global volatility festering amid signs of weaker regional growth, after the European Central Bank noted yesterday that incoming data has continued to be weaker than expected. This comes as European Central Bank board member Benoit Coeure stated in a Barron’s interview that there is insufficient economic data to conclude that the continent is facing a lasting and serious slowdown. Trade concerns continued to linger as markets appear to be discounting the chance that President Donald Trump and Chinese President Xi Jinping will meet again before a trade tariff deadline in March.

The euro and the British pound were lower versus the U.S. dollar, while bond yields in the region were mostly to the downside.

Stocks in Asia were lower, adding to a weekly drop in most markets on the heels of a sharp fall in the U.S. yesterday, with global market jitters continuing to climb and volatility persisting, as crude oil prices moved lower. U.S./China trade negotiations took center stage after comments from National Economic Council Director Larry Kudlow commented that a “sizable distance” remains between the two countries’ positions.

The yen gained ground to pressure markets in Japan, and following a report that showed the nation’s December account balance posted a surplus of 452.8 billion yen, shy of expectations. Stocks in Hong Kong saw modest declines, returning to action after an extended holiday break, while shares in South Korea and India also decreased. Mainland Chinese markets remained closed for the Lunar New Year.

Stocks add to weekly gains

While lower toward the latter part of the week, courtesy of increased trade jitters and global growth worries, the U.S. markets were able to post another week of gains. Trade worries flared up to end the week after National Economic Council Director Larry Kudlow commented that there was a “sizable distance” between the negotiations between the world’s two largest economies, while optimism that President Trump and Chinese leader Xi Jinping would meet ahead of March’s trade truce deadline seemed to decline.

The economic calendar was light, though the ISM non-Manufacturing Index decreased more than expected, with concerns over the partial government closing being mentioned. Weekly initial jobless claims showed a decline, although the government shutdown likely affected the data, while earnings season made a turn to the second half, with revenue and earnings beat rates near 60% and 70%, respectively, per data compiled by Bloomberg.

The markets had to contend with more signs that global monetary policies may be retreating from the normalization path. The Bank of England cut its economic outlook, warning that the “fog of Brexit” led it to leave its monetary policy unchanged, and the Reserve Bank of India cut rates while abandoning its hawkish tone. The U.S. dollar rebounded after finishing lower last week, while Treasury yields continued to slide. Crude oil prices fell, and gold was lower after reaching 2019 highs last week.

Although earnings season will continue to roll on, next week’s robust economic calendar is poised to garner some heightened attention, headlined by January reads on inflation in the form of the Consumer Price Index (CPI), the Producer Price Index (PPI) and the Import Price Index. Toward the beginning of the week, a Fed Chair speech could garner the market’s attention. Consumer health will also be on display, with the releases of December retail sales and the preliminary February University of Michigan Consumer Sentiment Index. Finally, manufacturing activity will also come into focus, courtesy of regional manufacturing and industrial production reports.