Increasing fears about the economic impact from the coronavirus weighed heavily on US Equity Markets last week, causing most indices to erase their gains for the year. The S&P 500 dropped 2.1% for the week and is now down 0.2% for the year. The Nasdaq fell 1.8% for the week but remains up 2.0% for the year, while the Russell 2000 (small-cap stocks) declined 2.9% for the week to widen its losses for the year to -3.3%.
Global equity markets suffered worse than US equity markets as more cases of the coronavirus reside overseas. Additional concerns in Europe from the UK officially leaving the European Union (Brexit), which went into effect on January 31, further weighed on European markets. As a result, Developed Markets decreased 2.5% for the week, bringing its losses for the year to -2.0%. Emerging Markets, which includes China, dropped a sharp 5.1% for the week, erasing its gains for the year. For the year, Emerging Markets are down 4.7%.
US Economic Data continue to suggest a healthy economy driven by a strong US consumer. The preliminary estimate for US economic growth (GDP) for the fourth quarter came in at 2.1%, ahead of expectations of 1.8%. Consumer Confidence for January rose to its highest level since August and also beat expectations. Inflation remains in check, running at a 1.6% annualized rate. The ongoing weak spot remains US manufacturing, with measures of some regional activity for January continuing to decline further into "contractionary" territory.
Of Interest to Us
While the attention of investors has been diverted to coronavirus fears, US corporate earnings, which ultimately drive stock prices, have been coming in better-than-expected for the fourth quarter. With roughly 45% of companies having reported their results, 69% of companies have beaten earnings forecasts and 65% of companies have exceeded sales forecasts. Both are higher than historical norms.
for the week ending 1/31/2020
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