In this week's recap: Major equity indices correct as Wall Street reacts to coronavirus updates, consumer confidence indices are at high levels, and the pace of new home sales increases.
Weekly Economic Update
Presented by Paul Moffat, MBA, AIF®, March 2, 2020
THE WEEK ON WALL STREET
Stocks fell sharply last week as Wall Street considered how the coronavirus outbreak might influence global business activity and household spending.
The selloff became a correction for the U.S. markets. The S&P 500 retreated 11.49%; the Dow Jones Industrial Average, 12.36%; the Nasdaq Composite, 10.54%. The MSCI EAFE, tracking developed stock markets outside North America, had fallen 6.75% week-over-week by Friday's closing bell.
On Friday afternoon, Federal Reserve Chair Jerome Powell stated that central bank officials were willing to "use our tools and act as appropriate to support the economy."1,2,3
STRONG CONSUMER CONFIDENCE, PLUS A BOOST FOR INCOMES
A trio of economic indicators, pertaining to U.S. households, looked solid last week. The Conference Board's Consumer Confidence Index notched consecutive months above 130 for the first time since July-August 2019, posting a 130.7 February mark. The University of Michigan's final February Consumer Sentiment Index came in at 101.0, ticking up from a preliminary 100.9.
Friday, the Department of Commerce reported that Americans increased their personal spending by 0.2% in January, while personal incomes improved 0.6%.4,5
BUYERS HAVE FLOCKED TO NEW HOMES
New home sales, according to the Census Bureau, improved 7.9% in January; the annualized pace of new home buying was the best seen since July 2007. Year-over-year, sales were up 18.6%. Housing market analysts cited a favorable economy and favorable weather as factors.6
Right now, there is no forecast for how the coronavirus outbreak may affect consumer demand or supply chains. The impact may not be known for months. But remember, your investment strategy should reflect your risk tolerance, time horizon, and goals, and it also should take into consideration periods of market volatility. Fear is driving decisions in the financial markets. Nobody would blame you if this uncertainty gave you a bit of anxiety as well.
T I P O F T H E W E E K
A market drop also presents an occasion to buy shares of large companies at a potentially lower cost.
THE WEEK AHEAD: KEY ECONOMIC DATA
Wednesday: Automatic Data Processing (ADP) publishes its February private payrolls report, and ISM's index of February service-sector business activity appears.
Friday: The Department of Labor presents its February employment report.
Source: MarketWatch, February 28, 2020
The MarketWatch economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Tuesday: AutoZone (AZO), Ross Stores (ROST), Target (TGT)
Thursday: Costco (COST), Kroger (KR)
Source: Zacks.com, February 28, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Q U O T E O F T H E W E E K
"Time does not change us. It just unfolds us."
T H E W E E K L Y R I D D L E
You see us regularly, but never at the same time. We appear everywhere but never in the same place. What are we?
LAST WEEK'S RIDDLE: Touching me is inevitable. I can send chills down spines. Even so, you may welcome me. What am I?
ANSWER: The wind.
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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. and Canada. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the "NYSE") and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
- 1 - wsj.com/market-data [2/28/20]
- 2 - quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices [2/28/20]
- 3 - tinyurl.com/sbs2f9h [2/28/20]
- 4 - investing.com/economic-calendar/cb-consumer-confidence-48 [2/25/20]
- 5 - marketwatch.com/tools/calendars/economic [2/28/20]
- 6 - marketwatch.com/story/new-home-sales-soar-to-highest-level-since-2007-2020-02-26 [2/26/20]
- wsj.com/market-data [2/28/20]
- quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices [2/28/20]
- quotes.wsj.com/index/SPX/historical-prices [2/28/20]
- treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldAll [2/28/20]