Month: March 2020

The Dow Jones Industrial Average gained 1.76 percent this week. The S&P 500 Index advanced 0.58 percent and the Nasdaq 0.03 percent.

We saw a divergence in performance this week. There was some selling in sectors directly affected by the coronavirus, such as airlines, energy and cruise ships. The Dow Transports slid 4.58 percent on the week. SPDR Energy (XLE) fell 7.27 percent.

Investors purchased defensive and high quality stocks. SPDR Utilities (XLU) and SPDR Consumer Staples (XLP) won the week with gains of 7.91 percent and 6.09 percent, respectively. iShares Edge MSCI Minimum Volatility USA (USMV) benefited from this trend and climbed 3.81 percent. Vanguard Dividend Appreciation (VIG) also bested the broader market with an increase of 2.07 percent.

SPDR S&P Healthcare (XLV) rallied 4.89 percent. iShares U.S. Healthcare Providers (IHF) climbed 6.49 percent for the week and were up as much as 10 percent for the week on Wednesday.

The Federal Reserve announced an emergency rate cut of 50 basis points on Tuesday to boost asset prices.
Speculators are currently betting on another 50-basis point cut at the regularly scheduled March 18 meeting. The Fed funds range is currently at 1.00 to 1.25 percent.

Economic data shows the U.S. economy was strengthening before the hit from coronavirus. The manufacturing PMIs for March showed the sector expanding. Motor vehicle sales were stronger than expected at an annualized pace of 16.8 million vehicles.

U.S. employers created 273,000 new jobs in February, blowing away estimates of 165,000. Unemployment fell to 3.5 percent, while wage growth increased to 0.3 percent. All the data suggest the economy will quickly find its footing once the coronavirus lifts with warmer spring weather.

The 10-year yield closed at 0.71 percent and the 30-year yield sank to 1.22 percent, both all-time lows. Bonds benefited from falling rates, with Fidelity Corporate Bond (FCOR) gaining 1.45 percent. Higher yielding bonds struggled as credit risk increased, though iShares iBoxx High Yield Corporate Bond (HYG) only slipped 0.68 percent for the week.

Domestic stocks remain the best place to be invested. iShares MSCI EAFE (EFA) declined 0.93 percent and iShares MSCI Emerging Markets (EEM) declined 1.16 percent.

Equities rebounded on Monday, with the Dow Jones Industrial Average increasing 5.10 percent. It has now advanced 8.20 percent off its low on Friday. The S&P 500 rallied 4.60 percent and the Nasdaq gained 4.49 percent.

Several factors boosted stocks on Monday. Last week’s move was one of the most extreme in history, setting up a technical snap-back. Chinese factories are getting back to work faster than expected. There is also widespread anticipation of a globally coordinated intervention by central banks.

SPDR Utilities (XLU) rebounded 5.87 percent and SPDR Technology (XLK) climbed 5.79 percent. iShares Edge MSCI Minimum Volatility USA (USMV) jumped 5.53 percent as buyers sought stability. iShares Nasdaq Biotechnology (IBB) gained 4.71 percent. Biotech held up well during the market decline and IBB only needs a 4 percent rally to set a new all-time high.

The U.S. manufacturing sector expanded in February according to the PMI surveys. Germany’s PMI jumped from 45.3 in January to 48.0, indicating the heart of Europe’s manufacturing sector could be back on track. It’s likely the coronavirus will disrupt this in March, but manufacturing will return to its longer-term trend sooner rather than later.

Motor vehicle sales for February will be released tomorrow. Analysts expect they will match January’s annualized pace of 16.8 million vehicles.

The February employment report will be released. Economists project 170,000 new jobs, an unemployment rate of 3.5 percent and wage growth of 0.3 percent.

Crude oil bounced nearly 6 percent on Monday, lifting SPDR Energy (XLE) 4.15 percent. Natural gas bounced too, but potentially warmer weather in March kept a lid on First Trust ISE Revere Natural Gas (FCG). It advanced only 0.66 percent.

iShares MSCI Emerging Markets (EEM) gained 2.17 percent on Monday.

This week’s reporting companies includes Autozone (AZO), Kohl’s (KSS), Ross Stores (ROST), Urban Outfitters (URBN), Nordstrom (JWN), Brown-Forman (BFB), Campbell Soup (CPB), Splunk (SPLK), BJ’s Wholesale Club (BJ), Kroger (KR), Costco (COST) and Ambarella (AMBA).