Stocks Recover from Coronavirus Scare, New Hampshire Primaries Next
Weekly Market Update: Stocks Recover from Coronavirus Scare, New Hampshire Primaries Next
Global stocks jumped as risks waned over coronavirus. Sanders, Buttigieg take their early lead into New Hampshire primary on Tuesday.
Last Week Review
Global equities rose 2.7% last week, recovering losses from the prior week, as investors concerns about the coronavirus dissipated. The possibility of vaccinations by the second half of 2020 and an apparent decline in the growth rate of confirmed new cases lightened worries about a severe long-term economic impact. The extent of economic damaged caused by the coronavirus remains largely unknown and there is risk that the virus’ growth rate picks back up. U.S. interest rates moved higher with the 10-year Treasury yield climbing 8 basis points to 1.58%, recovering some of its 31-basis-point drop from the last two weeks in January.
Strong U.S. Jobs Gains
About 225,000 jobs were added in the U.S. in January, comfortably surpassing estimates. Unemployment stayed at near half-century lows while wages remained flat. The report confirmed that the U.S. labor market remains an economic bright spot.
U.S. Manufacturing Stays Strong, but Coronavirus Threatens
Manufacturing expanded in January, based on the Institute for Supply Management report. Still, the sector remains susceptible to deterioration from the coronavirus. Investors will look for consecutive months of expansion for signs that the sector has stabilized.
Coronavirus Threatens China Purchases of U.S. Products
China plans on Friday to cut tariffs in half on roughly $75 billion worth of U.S. products. While reductions were expected following the recent partial trade deal, the cut is a tailwind for global growth and demonstrates that China intends to follow through on terms agreed upon in the deal that it can control. The coronavirus, not within China’s control, may inhibit China’s ability to increase U.S. purchases to agreed-upon levels. The prospect for improved trade activity between the world’s two largest economies has been a tailwind for economic growth over recent months and investors will closely monitor any threat to this trend.
U.S. Earnings and Sales Are Up
Combined earnings of companies in the S&P 500 Index have grown 0.5% and sales are up 3.1%, after 64% of the companies in the index have reported. Earnings in the communication services and information technology sectors have come in ahead of expectations.
This Week Preview
Cisco to Report Earnings
Cisco Systems Inc. is expected to report on Wednesday out of the information technology sector. The company will look to continue what have been strong results so far for the sector. With 65% of the sector reported, tech earnings have beat expectations by 8.9% with growth of 5.3%.
Low Inflation Expected to Persist
The core Consumer Price Index, scheduled for Thursday, is expected to be slightly lower than the 2.2% previously reported. Ahead of the release, Federal Reserve Chair Jerome Powell will deliver his semiannual monetary policy report to Congress on Tuesday and Wednesday. No major news is expected to come of the testimony, but investors will look for clues on how the central bank is assessing the coronavirus outbreak.
U.S. Presidential Primary Continues in New Hampshire
Democratic candidates Pete Buttigieg and Bernie Sanders appeared to emerge as leaders in preliminary results from last week’s Iowa caucus. However, many headlines termed the caucus a “fiasco” as a bug in the voting app caused delays in the results, likely robbing some momentum from the winners. Moving to the New Hampshire primaries on Tuesday, candidates will try to separate themselves in the polls following the rather inconclusive results in Iowa.
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