Market Insights 2/3/2020

The U.S. equity markets were able to pare back some of the losses suffered last week amid heightened worries over the spreading outbreak of the coronavirus, after China announced stimulus measures and U.S. manufacturing output unexpectedly returned to growth to headline a variety of relatively upbeat global reports on the sector.

Treasury yields were mixed and the U.S. dollar was higher, while gold and crude oil prices were lower. Europe finished higher after last week’s selloff, while Asia was mixed as China tumbled in a return to action.

The Markets…

The Dow Jones Industrial Average rose 144 points (0.5%) to 28,400

The S&P 500 Index was up 23 points (0.7%) to 3,249

The Nasdaq Composite increased 122 points (1.3%) to 9,273

In heavy volume, 974 million shares were traded on the NYSE and 2.4 billion shares changed hands on the NASDAQ

WTI crude oil was down $1.45 to $50.11 per barrel and wholesale gasoline fell $0.03 to $1.47 per gallon

The Bloomberg gold spot price fell $12.53 to $1,576.63 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.5% to 97.84

Manufacturing output returns to expansion territory

The January Institute for Supply Management (ISM) Manufacturing Index rose to 50.9 from December’s 47.8 level, above the Bloomberg forecast of an increase to 48.5. The index returned to expansion territory (a reading above 50) for the first time since July 2019, as new orders grew solidly and production jumped, with both returning to expansion territory, while employment ticked higher but remained below 50.

Treasuries were mixed, as the yield on the 2-year note gained 2 basis points to 1.35%, the yield on the 10-year note ticked 1 bp higher to 1.52%, while the 30-year bond rate lost 1 bp to 2.00%.

This week, volatility is likely to persist as the Iowa caucus could cause the political front to compete for market attention with a continued robust earnings calendar, the focus on the coronavirus and some key data points from the economic front.

The week is poised to begin and end with a bang, as today’s manufacturing data precede Friday’s January non-farm payroll report and the Fed’s semi-annual monetary policy report to Congress.

Europe higher after last week’s selloff, Asia mixed as China tumbles in return to action

European equities finished higher, with the euro and British pound losing some ground on the U.S. dollar, as the global markets attempted to stabilize from last week’s drop amid intensified worries regarding the spreading of the coronavirus.

The U.K. FTSE 100 Index was up 0.6%, France’s CAC-40 Index and Germany’s DAX Index increased 0.5%, Switzerland’s Swiss Market Index and Spain’s IBEX 35 Index gained 0.4%, and Italy’s FTSE MIB Index rose 1.0%.

Stocks in Asia finished mixed to begin the month, with China’s Shanghai Composite Index dropping 7.7% in a return to action following a week-long break for the Lunar New Year holiday celebration that came as the global markets were roiled by the deadly outbreak of the coronavirus. The drop in China came even as the People’s Bank of China announced a series of stimulus measures in the wake of the outbreak.

Japan’s Nikkei 225 Index declined 1.0%, though the safe-haven yen did nudge lower, while South Korea’s Kospi Index finished little changed. India’s S&P BSE Sensex 30 Index increased 0.3% ahead of this week’s monetary policy decision from the Reserve Bank of India, while the Hong Kong Hang Seng Index advanced 0.2%. Australia’s S&P/ASX 200 Index traded 1.3% to the downside, with the Reserve Bank of Australia set to deliver its monetary policy decision tonight.