Markets Set All-Time Highs Lead by Tech and Subsiding Coronavirus
Market Recap Week ending 2/14/2020
Markets cruised to another set of all-time highs as large-cap tech continued to have strength, and fears of the coronavirus subsided. The S&P 500 gained 1.58% for the week while the NASDAQ popped 2.21%, the Dow increased 1.02% and the Russell 2000 tacked on 1.86%. The yield curve flattened a bit with the 2-year note yield increasing by three basis points to close at 1.42% and the 10-year bond yield remaining unchanged on the week at 1.58%. Gold gained $10.20 on the week to close at $1583.70 an Oz. WTI oil increased $1.58 or 3.1% to close at $51.93. We did have a change to the models last week. We added exposure to the emerging markets and reduced our cash position.
It was a relatively quiet week in the markets. The ebb and flow of news regarding the coronavirus continued to have an impact on the market. Early in the week, it appeared that new cases of the virus had stabilized and encouraged investors to push indices to new highs. However, later in the week, China announced that a new methodology would be used to assess the virus and indicated that there were many more individuals infected than had been previously thought. The Chinese government at the same time, removed two high ranking officials from office in the region where the virus is believed to have originated. The two moves appear to be political posturing and probably just confirm what most experts had been saying regarding China’s underestimation of contractions. Midweek Federal Reserve Chairman, Jerome Powell, during his Semi-annual testimony before congress said the Fed was “closing monitoring the situation” and its effects on the economy.
According to FactSet, 77% of the S&P 500 has now reported earnings. The blended growth rate of earnings per share ticked a bit higher from last week and now stands at 0.9%. Large Cap Tech continued to outperform last week off the back of the semiconductor sector which was up nearly 5%. NVIDIA crushed its top and bottom lines and gained 7% after its report. Micron and Applied Materials also had better than expected results. Despite the announcement of a $2 billion offering by Tesla, shares continued to trade higher and perhaps best demonstrates the underlying strength of large-cap tech.
On the economic front, headline retail sales came in at 0.3%, which was in-line with expectations. Preliminary University of Michigan Consumer Sentiment beat expectations coming in at 100.9 versus 99.2. Weekly Jobless claims came in at 205K versus 208K. Finally, Core CPI came in at 0.2 in-line with expectations.
