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Market Commentary for the week ending February 15th, 2020

Summary

  • U.S. stocks hit record highs while international markets gained but lag behind year-to-date
  • Retail sales grew as expected in January but showed some signs of concerns
  • The Justice Departments approves a long-in-the-making merger between the third and fourth largest wireless carriers

 

Market Performance Summary

Market indexes week ending February 14, 2020

Source: www.YCharts.com

Notable Market Headlines

As the acceleration in growth of the number of coronavirus cases appears to slow investors’ fears continue to fade. This relatively good news combined with economic and earnings numbers indicating the risk of a near-term recession is low, U.S. stocks climbed to record highs.

At the close of the week U.S. large stocks as measured by the S&P 500 were higher by another +1.6% bringing the year-to-date return to +4.9%. The Dow Jones Industrial Average gained as well but lagged behind higher by just +1.0% while the tech-heavy NASDAQ Composite surged another +2.2% for the week and now up an impressive +8.5% in 2020. Small U.S. stocks had a strong week gaining +1.8% lifting them into positive territory for the year.

International stocks rallied along with U.S. stocks but developed country markets lagged well behind up just +0.4% for the week and remain in negative territory year-to-date by -0.4%. The notable loser for the week was Japan’s market falling -1.7% in front of a report showing its economy retracting sharply. Emerging markets performed much better though higher by +1.9% helped by the biggest, China, rebounding from prior loses up +2.5% in the most recent week. In spite of the rebound in both overall emerging markets and in China, both remain lower year-to-date by -1.5% and -1.3% respectively.

The alternative asset classes were all higher for the week with real estate stocks jumping the most up +3.3%. Commodities, impacted mostly by the price of oil, gained +2.1% but remain sharply lower year-to-date while the price of gold rose +0.8%. It was a relatively rare week that all of these asset classes moved higher while stocks did the same.

Bond prices were little changed up +0.1% for the week as Wall Street continues to expect the Federal Reserve to keep interest rates unchanged for the foreseeable future.

Stock Highlights

NVIDIA (NVDA), a worldwide leader in graphics processing chips, reported quarterly results with both sales and earnings topping analyst estimates even after the company raised guidance just a month ago. As good as this report was, revenue is still down sharply from a year ago but the trend has resumed a positive direction as illustrated in the accompanying graph. Investors were pleased with the news driving the stock higher by +15.2% making it the best performer among the S&P 500 stocks for the week.

Nvidia (NVDA) 12-month trailing revenue

Source: www.YCharts.com

The U.S. Department of Justice approved the merger of the third largest wireless carrier T-Mobile (TMUS) with the fourth largest Sprint (S). As part of the deal the companies will have to sell certain assets to satellite TV provider Dish Networks (DISH) positioning this company to enter the wireless market. The combination of these two companies give them a combined subscriber base of approximately 90 million just behind Verizon (VZ) and AT&T (T) that each have about 100 million. T-Mobile’s stock jumped +12.9% for the week while Sprint’s surge +76%!

Expedia Group (EXPE), the world’s largest online travel agency, reported quarterly results that topped expectations. It’s stock rallied +11.6% for the week.

Under Armour (UA), a manufacturer and retailer of sporting apparel, reported quarterly numbers generally in-line with expectations but management provided disappointing guidance for the remainder of 2020 which is being partially explained by an impact from the coronavirus. This company has struggled to grow sales the past couple of years causing investors to suffer. For the week this stock was down -15.1% and is off approximately two-thirds from its 2016 all-time high!

Economic Indicator - Reported

Retails Sales for the month of January grew by +0.3% in-line with economists’ expectations and slightly better than the prior month’s growth. The good news though was relatively concentrated in home improvement centers such as Home Depot (HD) and Lowes (LOW) with most other segments of the economy lagging.

Consumer prices, as measured by the Consumer Price Index (CPI), rose by +0.1% in the most recent month, below expectations, while the core rate, excluding volatile food and energy prices, gained +0.2% Year-over-year inflation ticked higher to +2.5% but this is still relatively low by historic standards and is widely expected to continue to be moderate.

Economic Indicators – Upcoming

The following economic data are expected in the coming week:

  • Producer Price Index (PPI)
  • Housing Starts
  • Leading Economic Indicators

Contact Mark A. Patton :