“Score: (Coronavirus 2 – Market -733)” Vista Partners’ Friday Weekly Market Wrap For January 31, 2020

The broad markets overall declined again for the second week in a row plagued by the reported developments & fear of the coronavirus situation adding to the real or perceived realization of waning global growth. Investors fled to safety throughout the week and we experienced a great deal more volatility and saw the markets selloff sharply on Friday as the Dow lost -603.41 in the single session and -733 points (-2.5%) overall this week closing at 28,256.03 and now down -1% for the year.

With the flight to safety this week US treasury prices jumped while yields dropped as the inverse relationship dictates. The 2-yr yield decreased 16 basis points ending at 1.32% while the 10-yr yield also decreased 16 basis points to end at 1.52%. We may be headed towards a flattened if not inverted yield curve if we keep on the current track. The U.S. Dollar Index weakened by -.5% to end at 97.37. Oil prices lowered -4.7% to end at $51.64/bbl also a result of the dim views of global growth this week.

The S&P 500 ended the week at 3,225.52, representing a -2.1% weekly decline and now down -.2 % YTD. The energy, -5.7%, materials, -3.5%, & health care, -3.3%, sectors weighed heaving on the S&P 500 this week.

The Nasdaq Composite closed at 9,150.94 on Friday, representing a weekly -1.8% decline and is up +2% YTD.

The Russell 2000 moved lower closing at 1614.063 representing a weekly -2.9% decline and is now down -3.2% YTD.

The “fear gauge” Vix (TVIX) ended at $56.58/share up +21.49% today & up from $44.75/share last Friday’s close.

The FAANG stocks closed as follows on Friday:

• Facebook (FB) $201.91/share, -.3.64% ($217.94/share a week ago)
• Amazon (AMZN) $2,008.72/share, +7.38% ($1861.64/share a week ago)
• Apple, Inc. (AAPL) closed at $309.51/share, -4,43% after hitting a new all-time high of $323.32/share recently ($318.73/share a week ago)
• Netflix (NFLX) $345.09/share, -.76%, ($353.16/share a week ago)
• Alphabet (GOOG) $1434.23/share, -1.48%, ($1466.71/share a week ago)

My hometown San Francisco 49ers are scheduled to take the field this Sunday in Miami to fight the Kansas City Chiefs in the Superbowl. Go Niners!   Please send me your pick and what you believe the score will be this weekend.

Economic Reports

On Monday we received the New home sales report which confirmed a drop by -.4% month/month in December to a seasonally adjusted annual rate of 694k units.

On Tuesday, we received the Conference Board’s Consumer Confidence Index report which increased to 131.6 in January. Total durable goods orders report increased +2.4% month/month in December. When excluding transportation, durable goods orders dropped -.1%. The S&P Case-Shiller Home Price Index moved up +2.6% year/year in November.

On Wednesday, we received the Pending Home Sales report which dropped -4.9% in December. The Advance report for International Trade in Goods for December confirmed a deficit of $68.3B vs. $63.2B in November. The Advance report for Retail Inventories for December was flat while the Advance report for Wholesale Inventories for December dropped -.1%. The weekly MBA Mortgage Applications Index Report jumped +7.2%. The Fed left the interest rate target unchanged pointing to their desire to return to the 2% inflation target.

On Thursday, the Real GDP report showed a move higher at a seasonally adjusted annual rate of +2.1% in Q4. The GDP Price Deflator was up +1.4%. For the week ending January 25, initial claims dropped by 7k to 216k while continuing claims for the week ending January 18 dropped by 44k to 1.703M.

On Friday, we received the Personal income report which confirmed that it moved higher by +.2% month/month in December. Personal spending moved higher by +.3%. The PCE Price Index Report showed it moved higher by +.3%. The year/year change is currently at +1.6%. The core PCE Price Index report showed a move higher by +.2%. The year/year change is currently at+1.6% well below the Fed target of 2%.
The Q4 Employment Cost Index Report confirmed a move higher by +.7%.  The final reading for the January University of Michigan Index of Consumer Sentiment confirmed a move higher to 99.8 while the final reading for December was 99.3.
The Chicago PMI for January decreased to 42.9.

Investing & Inspiration

“The fundamental law of investing is the uncertainty of the future.” -Peter Bernstein

“How many millionaires do you know who have become wealthy by investing in savings accounts?” -Robert G Allen

“Greed is all right, by the way. I think greed is healthy. You can be greedy and still feel good about yourself.”-Ivan Boesky

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner

“The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru

“I talk about macro themes a lot because they are fun to talk about, but it is the risk management that is the most important thing. The risk control is all bottom-up. I structured the business right from the get-go so that we would have lots of diversification.” -Michael Platt

“Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.” -Larry Summers

Tomorrow

We are due to receive the following significant economic data next week:

• The ISM manufacturing Purchasing Managers Index (PMI) report on Monday,
• The services PMI on Wednesday, &
• The January’s jobs report on Friday