Telemus Weekly Market Review January 20th - January 24th, 2020

January 20 – January 24 Week in review

In holiday shortened trading last week stocks struggled to hold off growing concern about the coronavirus and valuations. After hitting new highs early in the week, the S&P 500 fell 1.0%, the Dow Jones Industrial Average 1.2%, and the Nasdaq Composite 0.8%. The Russell 2000 continued to underperform with a 2.2% weekly decline.

A new strain of coronavirus originated in Wuhan, China and forced the country to lock down several cities right before the Lunar New Year festivities. There were two confirmed cases in the U.S., one in Seattle and the other in Chicago, but the World Health Organization did not declare an international virus alert or public health emergency.

As a result there were concerns that economic activity would slow down, as well as earnings growth, which provided investors a convenient excuse to take profits in a market some think is overvalued. Growth concerns were exhibited in the 7.4% weekly drop in the price of WTI crude, the advance in Treasuries, and the heavy losses in the cyclical, energy, materials, and financials sectors.

Conversely, the interest rate sensitive utilities and real estate sectors finished comfortably higher helped by the decline in Treasury yields. The information technology sector rose, thanks to gains in IBM and Intel. IBM reported slightly better earnings and its first sales gain in a number of quarters. Shares of Intel surged 8% on Friday after reporting better than expected earnings.

Also in the semiconductor space, Bloomberg reported that Apple will begin producing low cost iPhones next month and asked Taiwan Semi to increase its chip supply to meet strong iPhone demand. Additionally Broadcom reached two, separate agreements with Apple to supply it with high-performance wireless components and modules.

Other notable stories last week included Tesla reaching a $100 billion market-cap valuation and Boeing delaying its 737 MAX timeline to mid-2020. A report on Friday indicated the FAA could approve the 737 MAX before mid-year, though, making Boeing stock one of the few bright spots.

The U.S. Treasury market experienced some curve flattening activity last week as investors sought a safe haven. The 2 year yield dropped eight basis points to 1.48%, and the 10 year yield dropped 16 basis points to 1.68%.

In other markets last week the U.S. Dollar Index advanced 0.3% to 97.86. WTI crude ended at $54.21 a barrel.

January 27 – January 31 Economic Calendar