Vista Partners’ Weekly Market Wrap – Friday, Feb. 21, 2020

The broad markets overall closed off of last week’s mark after hitting new record highs in the early part of the week. We saw fears of slowing global growth, as a result, of further disruption of supply and business,  as deaths from the coronavirus grew. We also saw further flattening yield curve as rates dropped again which always causes great concern and as a result of an increased flight to safety.  The 2-yr yield dropped by 7 basis points ending at 1.35% while the 10-yr yield dropped at 1.47% as money moved into this safe asset. In contrast, we continued to see somewhat positive economic reports surface throughout the week except for the IHS Markit which confirmed a contraction in the U.S. services sectors in February & activity in the manufacturing sectors slowed. However, the U.S. Dollar Index strengthened by +.2% to end the week at 99.32.  Oil prices rose again this week ending up +2.5%,  now down -12.7% YTD and closing at $53.33/bbl. Gold prices closed at $1,645.90/0z. up from $1,586.90/oz & silver closed higher at $18.46/oz up from $17.72/oz last Friday as investors further searched for safe havens to the equities markets. 

The Dow ended the week at 28,992.41, down -1.4% and is now up 1.6% YTD. The S&P 500 ended the week at 3,337.75, representing a -1.3% weekly loss and is now up 3.3% YTD. The information technology down -2.5% & the financials, down -1.3% led all 11 sectors into the red this week. The Nasdaq Composite closed at 9,576.59 on Friday, representing a weekly -1.6% downward move but remains up +6.7% YTD. The Russell 2000 moved lower closing at 1678.61 representing a weekly -.5% drop and is up +.6% YTD.

The “fear gauge” Vix (TVIX) ended at $46.80/share up +12.15% today & up from $39.14/share last Friday’s close.

The FAANG stocks closed as follows on Friday and had an overall negative week in the information technology sector:

• Facebook (FB) $210.18/share, -2.05% ($214.18/share a week ago)
• Amazon (AMZN) $2,095.97/share, -2.65% ($2,134.87/share a week ago)
• Apple, Inc. (AAPL) closed at $313.05/share, -2.26% ($324.95/share a week ago)
• Netflix (NFLX) $380.07/share, -1.54%, ($380.40/share a week ago)
• Alphabet (GOOG) $1485.11/share, -2.18%, ($1520.74/share a week ago)

Economic Reports

On Monday we did not receive any significant macroeconomic data as it was Presidents’ Day.

On Tuesday, we received the Empire State Manufacturing Survey for February moved up to 12.9. The NAHB Housing Market Index for February moved lower to 74.

On Wednesday, the Producer Price Index for January confirmed a move up by +.5% month/month and core PPI, which excludes food and energy, moved higher by +.5%. Building permits were confirmed to have moved up +9.2% month/month to 1.551M & were up 17.9% year/year. The weekly MBA Mortgage Applications Index dropped by -6.4%.

On Thursday, the initial claims report for the week ending February 15 showed a move higher by 4k to a 210k while continuing claims for the week ending February 8 moved higher by 25k to 1.726M. The Conference Board’s Leading Economic Index (LEI) report moved higher by +8% in January. The Philadelphia Fed Index report for February jumped to 36.7 ) from January’s mark of 17.

On Friday, the existing home sales report showed a drop by -1.3% month/month in January to a seasonally adjusted annual rate of 5.46M units while total sales were jumped +9.6% y-o-y.

Investing & Inspiration

“The riskiest thing we can do is just maintain the status quo. I get up at 4:30 in the morning, seven days a week, no matter where I am in the world. I think it is important for people who are given leadership roles to assume that role immediately. What I’ve really learned over time is that optimism is a very, very important part of leadership.” – Bob Iger, Ceo of Disney

“In the short run, the market is a voting machine. But in the long run, it is a weighing machine.” – Ben Graham

“In investing, what is comfortable is rarely profitable.” -Robert Arnott

“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

Markets are closed on Monday in observance of President’s Day.

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

• The consumer confidence on Tuesday
• The new home sales on Wednesday
• The personal income and spending on Friday