Vista Partners’ Friday Weekly Market Wrap For January 17, 2020

The broad markets advanced again this week to new record highs as a healthy job market & a low-interest-rate environment continue to drive spending again this year. The earnings report schedule began to roll out which was most favorable out of the banking sector from the likes of Morgan Stanley (MS).

We saw the “Phase One” Agreement in the US-China Trade war be inked on Wednesday. The “Phase Two” portion will likely be pushed off until after the US presidential election so it should not rear its head to cause a pause in the meantime. The US further removed China from the currency manipulator list. So everyone seems to be playing nice for now.

The 38th Annual JPMorgan Healthcare Conference, the largest health care and biotech conference in the world took place in San Francisco this week & is now in the books. We saw a number of deals in the space signed and/or be baked. I had over 40 meetings with CEOs, investors, and bankers involved in the sector and gained a great deal of insight and look forward to going through my notes in the coming days.

The FAANG stocks closed as follows on Friday:

• Facebook (FB) $222.14/share, +.17% ($218.06/share a week ago)
• Amazon (AMZN) $1864.72/share, -.94% ($1883.16/share a week ago)
• Apple, Inc. (AAPL) closed at $318.73/share, +1.11% after hitting a new all-time high of $318.74/share ($310.33/share a week ago)
• Netflix (NFLX) $339.67/share, +.31%, ($329.05/share a week ago)
• Alphabet (GOOG) $1480.39/share, +1.98%, ($1429.73/share a week ago)

The S&P 500 ended the week at 3,329.62, representing a +2% weekly increase and now up +3.1 % YTD. The utilities sector led the way with a +3.8% weekly gain. The Dow Jones Industrial Average ended at 289,348.10 representing a +1.5% weekly increase and now up +2.8% YTD. The Nasdaq Composite closed at 9,388.94 on Friday, realizing a weekly +2.3% advance and up 4.6% YTD. The Russell 2000 moved higher closing at 1699.64 representing a weekly 2.5% increase and is now up +1.9% YTD. The “fear gauge” Vix (TVIX) ended at $39.36/share up +.15% today but down from $44.5/share last Friday’s close.

Economic Reports

On Monday the Treasury Budget Report for December confirmed a deficit of $13.3B vs. a deficit of $13.5B in the same period a year ago while the over the last 12 months is $1.022T.

On Tuesday, the Consumer Price Index Report for December confirmed that Total CPI was up +.2% month/month while core CPI moved up by +.1%  The NFIB Small Business Optimism Index Report showed a move lower to 102.7 from 104.7.

On Wednesday we had a fairly busy economic schedule as the Producer Price Index for final demand moved up by +.1% as did the Producer Price index for final demand. The year/year moves higher are now at +1.3% and +1.1%, respectively. The Mortgage Bankers Association reported a whopping +30.2% jump in weekly mortgage applications. The Empire State Manufacturing Survey for January confirmed a move higher to 4.8. The Federal Reserve’s Beige Book for December stated that the economic activity during the last six weeks of 2019 continued its modest expanding ways.

It was busy again on Thursday, the Retail Sales report revealed a move higher by +.3% month/month in December. Retail sales, excluding autos, rose +.7%. The Initial claims report for the week ending January 11 decreased by 10k to 204k while continuing claims for the week ending January 4 dropped by 37k to 1.767M. Import prices for December were rose +.3% as export prices were decreased by -.2%. Total business inventories dropped by -.2% m/m in November. Total business sales rose +.7%. The Philadelphia Fed Index for January flew up to 17. The NAHB Housing Market Index for January decreased to 75.

On Friday, the economic schedule produced the total housing starts report which jumped +16.9% month/month in December to a seasonally adjusted annual rate of 1.608M. There was a +11.2% increase in single-family starts and a sizable +30% increase in multi-unit starts. Building permits, however, decreased -3.9% month/month to 1.416M & single-family permits dropped by -.5%. The industrial production report confirmed a decrease by -.3% in December  The capacity utilization rate dropped to 77% in December. The preliminary reading of the University of Michigan’s Index of Consumer Sentiment for January dropped to 99.1. Job openings went down to 6.8M.

Investing & Inspiration

“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

The Martin Luther King Jr. holiday is on Monday and that means the markets are closed.

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

• Pending home sales on Wednesday,
• Leading index on Thursday, and
• Markit Purchasing Managers’ Index on Friday.
• The earnings report season will bring forth 43 companies of the S&P 500 reporting Q4 earnings.