Market Insights 2/14/2020

U.S. stocks finished mixed in final session of the week, as investors continue to monitor developments and the potential economic impact surrounding the spreading coronavirus.

Treasuries and the U.S. dollar were higher. Gold and crude oil prices gained ground. Global equities finished mixed.

The Markets…

The Dow Jones Industrial Average was down 25 points (0.1%) to 29,398,

The S&P 500 rose 6 points (0.2%) to 3,380 and

The NASDAQ was up 19 points (0.2%) to 9,731.

Volume was light with 844 million shares were traded on the NYSE and 2.2 billion shares changed hands on the NASDAQ.

WTI oil was up $0.63 to $52.05 per barrel and wholesale gasoline was flat at $1.58 per gallon. Elsewhere,

The Bloomberg gold spot price was up $7.60 to $1,586.40 per ounce.

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

For the week, the Dow rose 1.0%, the S&P 500 added 1.6% and the NASDAQ added 2.2%.

Q4 earnings season is winding down, and approximately 66% of the 389 S&P 500 companies that have reported thus far have topped revenue forecasts and roughly 76% have exceeded earnings estimates.

Sales growth compared to last year is tracking at about 3.6%, and earnings expansion is on pace to post a 1.3% rate, with the healthcare sector leading on the revenue side, while utilities and communications services sectors are showing the strongest earnings growth.

Core retail sales and industrial production miss, but consumer sentiment nears a two-year high

The February preliminary University of Michigan Consumer Sentiment Index rose to 100.9 versus expectations to dip to 99.5 from January’s 99.8 reading. The index hit the highest level since March 2018, as a dip in the current conditions portion of the report was more than offset by a solid gain for the expectations component. The 1-year inflation forecast remained at January’s 2.5% rate, but the 5-10 year inflation forecast declined to 2.3% from 2.5%.

Advance retail sales for January rose 0.3% month-over-month, matching the Bloomberg forecast, and above December’s downward-revised 0.2% increase. Last month’s sales ex-autos moved 0.3% higher m/m, in line with expectations but below December’s negatively-revised 0.6% increase. Sales ex-autos and gas grew 0.4% m/m, compared to estimates of a 0.3% gain, and December’s reading was unadjusted at a 0.5% rise.

Motor vehicle and furniture sales were higher, and sales at non-store retailers, which includes online activity, ticked to the upside. However, the control group—a figure that excludes food services, car dealers, building materials and gasoline stations and is used to calculate GDP—was flat m/m, south of projections of a 0.3% gain and December’s downward-adjusted 0.2% increase.

Sales of clothing, electronics and appliances, and health and personal care, all declined to weigh on the report.

Treasuries were higher, with the yield on the 2-year falling 2 basis points to 1.43% and the 10-year note and the 30-year bond rates shedding 3 basis points to 1.59% and 2.04%, respectively.

Europe mixed on data and coronavirus uncertainty

Global equities finished mixed, with the markets continuing to grapple with the rising uncertainty regarding the spreading of the coronavirus. Eurozone Q4 GDP growth showed the combined economy of the 19 member nations grew 0.1% quarter-over-quarter to match forecasts, while a 0.9% year-over year growth rate was a bit south of the expected 1.0% gain.

The euro was flat versus the U.S. dollar, the British pound paused from its recent rise and the Japanese yen strengthened modestly.

As for the major global indexes, the U.K. FTSE 100 Index was down 0.6%, France’s CAC-40 Index decreased 0.4%, and Italy’s FTSE MIB Index dipped 0.1%, while Germany’s DAX Index was little changed, Spain’s IBEX 35 Index rose 0.5%, and Switzerland’s Swiss Market Index advanced 0.3%.

China’s Shanghai Composite Index rose 0.4% and the Hong Kong Hang Seng Index gained 0.3%. South Korea’s Kospi Index traded 0.5% to the upside and Australia’s S&P/ASX 200 Index advanced 0.4%. Japan’s Nikkei 225 Index declined 0.6%. India’s S&P BSE Sensex 30 Index decreased 0.5%.

Stocks overcome coronavirus choppiness

Stocks posted a second-straight weekly rally, notching another round of record highs and showing some resiliency in the face of ongoing uncertainty and choppiness that stemmed from the spreading coronavirus. The markets appeared to look past the impact of the outbreak, aided by a host of containment and stimulus measures out of China, and as earnings season continued to be highlighted by the chip companies to bolster the tech sector.

Economic data remained relatively positive, with small business optimism improving more than expected, subdued inflation persisting, jobless claims continuing at historically low levels, and consumer sentiment charging closer to a two-year high. All the major stock market sectors finished higher and the aforementioned tech strength was met with noticeable gains for real estate and consumer discretionary issues.

The coronavirus uncertainty has added another layer of pressure on Treasury yields as the curve remained flat, while the U.S. dollar extended its grind higher that began at the start of 2020. Crude oil prices recovered from Monday’s year-low to help the energy sector stem a recent tumble and gold continued to find demand.

Next week, although shortened by Monday’s Presidents’ Day holiday, as all U.S. markets will be closed, Q4 earnings season will continue toward the home stretch, headlined by Dow member Walmart Inc’s results, and the economic calendar will remain active. Housing will come into focus, courtesy of the releases of the NAHB Housing Market Index, housing starts and building permits, and existing home sales. M