Investors shrugged off coronavirus fears last week, reassured by Federal Reserve Chairman Powell's testimony to Congress that the Fed could take actions if the coronavirus has an undue economic impact on the US. As a result, the S&P 500 touched record highs again, closing the week up 1.6% to bring its gains for the year to 4.6%. The Nasdaq continues to lead the major averages, up 2.2% last week and 8.5% year-to-date, while the Russell 2000 (small-cap stocks) continues to lag, up 1.9% for the week and only 1.2% for the year.
Global equity markets were more subdued last week, as disappointing European economic data and relatively weak Japanese shares impacted equity markets. Developed Markets still eked out a 0.1% gain for the week, though they remain down -0.2% for the year. Emerging Markets posted stronger gains as Chinese shares continue to rebound. For the week, Emerging Markets increased 1.3%, though they remain down -0.8% for the year.
After notable declines so far this year, US Interest Rates appear to be leveling off. Fed Chairman Powell had his semi-annual testimony before Congress last week, where he suggested that the Fed would likely keep rates where they are, though they are monitoring closely the coronavirus situation. The yield on the US 10-Year Treasury held steady at 1.59% compared to 1.92% at the end of 2019. Interestingly, the Street is actually placing a roughly 57% chance that the Fed will lower rates by 0.25% in July.
Of Interest to Us
With about 77% of companies reporting their fourth quarter results thus far, US corporate earnings continue to come in better than expected. About 71% of companies have beaten earnings expectations, and 67% have exceeded sales forecasts, both higher than historical norms. Earnings growth for the quarter is lukewarm, only up about 1%, though this is better than the almost 3% decline that was expected prior to the start of earnings season.
for the week ending 2/14/2020
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