Market Insights 2/21/2020

U.S. equities finished solidly lower, posting the first weekly losses in three weeks, as angst over the continued uncertainty surrounding the impact of the coronavirus weighed on sentiment.

The uneasiness pressured Treasury yields, the U.S. dollar and crude oil prices, while gold prices rallied on the flight to safety.

Markets in Europe and Asia also finished lower.

The Markets…

The Dow Jones Industrial Average decreased 228 points (0.8%) to 28,992

The S&P 500 Index tumbled 35 points (1.1%) to 3,338

The Nasdaq Composite plunged 175 points (1.8%) to 9,577

In heavy volume, 1.1 billion shares were traded on the NYSE and 2.7 billion shares changed hands on the NASDAQ

WTI crude oil declined $0.50 to $53.38 per barrel and wholesale gasoline shed $0.02 to $1.76 per gallon

The Bloomberg gold spot price rallied $24.29 to $1,643.85 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.5% to 99.33

Markets were lower for the week, as the DJIA declined 1.4%, the S&P 500 Index lost 1.2%, and the Nasdaq Composite fell 1.6%

Business activity reports show output slowed, existing home sales slip

The preliminary Markit U.S. Manufacturing PMI Index for February declined to 50.8 from January’s unrevised 51.9 figure, below the Bloomberg consensus estimate calling for a dip to 51.5. The preliminary Markit U.S. Services PMI Index showed output for the key U.S. sector fell into contraction territory this month, dropping to 49.4 from January’s 53.4 figure, where it was forecasted to remain. A reading of 50 for both indexes is the demarcation point between expansion and contraction.

Existing home sales declined 1.3% month-over-month in January to an annual rate of 5.46 million units, compared to expectations of 5.44 million units and December’s downwardly-revised 5.53 million rate. Sales of single-family homes and purchases of condominiums and co-ops both declined m/m but remained higher versus year ago levels. The median existing home price was up 6.8% from a year ago to $266,300, marking the 95th straight month of y/y gains. Unsold inventory came in at a 3.1-months pace at the current sales rate, up from the 3.0-months pace set the prior month.

National Association of Realtors Chief Economist Lawrence Yun said, “The trend line for housing starts is increasing and showing steady improvement, which should ultimately lead to more home sales,” adding that “Mortgage rates have helped with affordability, but it is supply conditions that are driving price growth.”

Treasuries jumped, as the yield on the 2-year note lost 3 basis points (bps) to 1.36%, while the yields on the 10-year note and the 30-year bond were down 5 bps to 1.47% and 1.92%, respectively. Bond yields remained under pressure and gold rallied as the uncertainty regarding the economic impact of the coronavirus outbreak continued to foster a flight to safety.

Europe and Asia lower on data and festering virus uncertainty

European equities finished lower, as the uncertainty regarding the impact of the coronavirus outbreak continued to hamper sentiment, while also applying pressure on global bond yields. The euro and British pound gained solid ground on the U.S. dollar, while bond yields were mostly lower.

The U.K. FTSE 100 Index and Switzerland’s Swiss Market Index were down 0.4%, France’s CAC-40 Index and Spain’s IBEX 35 Index lost 0.5%, Germany’s DAX Index declined 0.6%, and Italy’s FTSE MIB Index fell 1.2%.

Stocks in Asia finished mostly to the downside with the uncertainty regarding the impact of the coronavirus outbreak, which continues to grow outside the epicenter of China, remaining a drag on conviction, while some disappointing economic data out of Australia and Japan added to the negative tone.

Japan’s Nikkei 225 Index declined 0.4% and South Korea’s Kospi Index fell 1.5%, while Australia’s S&P/ASX 200 Index decreased 0.3%. The Hong Kong Hang Seng Index dropped 1.1%, but China’s Shanghai Composite Index advanced 0.3% amid reports of business activity resuming and in the wake of the recent flood of stimulus measures that the country has deployed to combat the impact of the virus.