Market Insights 1/21/2020

Equities around the world sold off a bit today on the heels of a reduction in the global growth outlook from the International Monetary Fund and confirmation from the Center for Disease Control of the first U.S. case of coronavirus.

The disease has already sickened hundreds of people in the Wuhan region of China and killed six.

Interest rates around the world fell amid the weakness in equities. The U.S. dollar was flat as safe-haven flows likely offset the pressure from substantially lower Treasury yields. Crude oil prices and gold also finished lower.

The Markets…

The Dow Jones Industrial Average fell 152 points (0.5%) to 29,196

The S&P 500 was down 9 points (0.3%) to 3,321

The NASDAQ shed 18 points (0.2%) to 9,371

1 billion shares were traded on the NYSE and 2.7 billion shares changed hands on the NASDAQ

WTI oil shed $0.20 to $58.38 per barrel and wholesale gasoline was flat at $1.64 per gallon

The Bloomberg gold spot price shed $2.40 to $1,557.90 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat

Treasury yields see pressure as economic calendar remains on break

Treasuries were higher and the curve flattened, with the yield on the 2-year note decreasing 3 basis points (bps) to 1.53% and a 5 bps decline on the yields of the 10-year note and the 30-year bond to 1.77% and 2.23%, respectively.

The economic calendar was quiet today following yesterday’s holiday break. It will heat up tomorrow, delivering more housing data in the form of existing home sales, which will be followed by Markit’s preliminary January reads on manufacturing and services activity, while jobless claims will likely continue to garner attention and the Leading Index will bring a timely read on the economy.

The U.S. economy split sharply in 2019—manufacturing activity lagged services, corporate profits lagged stock performance—while investor sentiment surged. How long will these divergences continue in 2020? The global economy is showing signs of stabilization, but global stocks priced in much of that improvement last year. This could mean weaker global stock market performance in 2020 than in 2019, despite a better economy.

Global Markets struggle along with U.S.

European equities finished mixed and Asian markets were lower. A negative tone was set by a global growth forecast reduction out of the International Monetary Fund (IMF), while a deadly virus outbreak in China appeared to cause some uneasiness in the markets.

The euro was flat versus the dollar and the British pound rose. The yen led the pack today, boosted by safe-haven flows and after the Bank of Japan kept its monetary policy stance unchanged, as was anticipated. Global bond yields were lower.

The U.K. FTSE 100 Index, France’s CAC-40 Index and Spain’s IBEX 35 Index all declined 0.5%, and Italy’s FTSE MIB Index fell 0.7%, while Germany’s DAX Index ticked 0.1% higher and Switzerland’s Swiss Market Index gained 0.3%.

China’s Shanghai Composite Index dropped 1.4% and South Korea’s Kospi Index traded 1.0% to the downside. Japan’s Nikkei 225 Index declined 0.9%. Australia’s S&P/ASX 200 Index dipped 0.2% and India’s S&P BSE Sensex 30 Index decreased 0.5%.