Markets “In a Nutshell” for February 4, 2020
Investment Week at a Glance
Stocks finished down for the week. The Dow Jones Industrial Average was down 2.53%, the S&P 500 fell 2.12%, the New York Stock Exchange Composite (2,000 stocks) fell 2.61% and the average investors index (Value Line Index) was down 3.55%. Foreign stocks (DJ Global ex U.S.) were down 3.12%. Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 15 basis points lower at 1.49%. (Data source: Wall Street Journal)
Stocks Fall on Virus Fears
The U.S. stock market fell again last week as the market continues to wrap its mind around the risks and implications of the coronavirus spreading within and increasingly outside of China. Many developed countries issued travel warnings and China is expected to be dealing with a material economic slowdown. With so much uncertainty surrounding the virus and little precedent to work with, analysts are struggling to gauge the risks of investing in the current market, which has led to the greatly increased volatility that has been experienced in the past 3 weeks. While many expect the virus to eventually be contained, the impact the virus has on global supply chains could cause a lasting effect if the damage to businesses proves to be more serious than is currently expected. (Barron’s)
GDP Growth Exceeds Expectations
The U.S Commerce Department reported that the economy grew at a 2.1% pace in the 4th Quarter of 2019 and 2.3% for all of 2019. Both beat expectations, but did show a mild slowdown in growth from 2018. One of the more concerning details from the 4th Quarter report was a worse than expected report on personal spending in a holiday season that was supposed to show a much stronger consumer. While the pace of spending only eased to a more moderate level, the rise in spending was the lowest since 2016 and worried economists that see the consumer as the backbone of the economy. Even while business spending and trade have been hampered by the trade dispute between the U.S. and China, consumer spending has powered the economy forward in the past two years, accounting for over two thirds of U.S. GDP. While the consensus is that consumer spending will continue to grow at least modestly, any negative surprises could spell danger into a year that has already off to a volatile start. (Barron’s)
Last week on Monday, the S&P 500 ended its streak of trading days without a move up or down of more than 1%. How long did that streak last?
Have a Great Week!
Answer to quiz:
4. The S&P 500 had not seen a move up or down of more than 1% in 70 trading days before last Monday. (Barron’s).