Market Performance Summary

Source: S&P Compustat, www.yahoo.com/finance for Commodities

Notable Market Headlines

After being higher every week for the year, the 2019 winning streak for stocks came to an end this week but remains one of the best starts for stocks in years. Impacting the markets this week were mixed reports on the economy, concerns that the Eurozone economies are weakening, and still no outcome on a trade deal with China.

At the close of the week large U.S. stocks as measured by the S&P 500 were lower by -2.1%. The Dow Jones Industrials and tech-heavy NASDAQ Composite fell similar amounts. Small U.S. stocks suffered much larger losses down -4.2% for the week. Smaller stocks tend to be more sensitive to the economy and could fare worse if we see a continued economic slowdown. In spite of the week’s losses though small stocks remaining the winners year-to-date with a gain of +13.3% while large U.S. stocks are higher by +9.8% in 2019.

There has been a wide range of returns among the major sectors in the market with Industrials, such as Boeing (BA) and General Electric (GE), doing the best up an average of +15.3% year-to-date. Technology stocks are right on the heels of Industrials with a year-to-date gain of +12.6% fueled by huge gains in stocks such as Xerox (XRX) up +53.3% and chip company Xilinx (XLNX) gaining +39.3%. The worst performing sector so far in 2019 has been Healthcare up just +4.2% after falling sharply this week.

Source: www.YCharts.com

International stocks fell along with U.S. stocks with developed markets off -1.8%. The strongest performer among the developed markets was Australia with a loss of just -0.8%. Weighing on European markets, the largest developed markets region, was the European Central Bank’s (ECB) decision to restart the stimulus plan it just stopped three months ago due to concerns of continued slowing economic growth. This could be helpful to the economy and markets longer term but there is some concern about this reversed course.

Emerging markets were also lower by -2.0%. South Korea’s market was one of the biggest losers down -3.7% followed by China’s loss of -3.2%. Year-to-date international markets are lagging behind U.S. markets with developed markets up +8.0% for the year while emerging markets are up just +6.6%.

Alternative assets held up well helping the performance of well-diversified portfolios. All were higher with real estate gaining +0.1%, gold up +0.8%, and commodities higher by +0.2%. This is exactly the type of performance investors would hope for during periods when stocks selloff. Year-to-date both real estate and commodities are up better than +11% while gold has gained just +1.3%.

Bond prices moved higher for the week as signs of a continued slowing economy further reduces the odds the Federal Reserve will raise interest rates anytime soon. At the close of the week bonds were higher by +0.8%, a strong move for bonds, with the benchmark 10-year Treasury Yield falling to 2.635% from 2.754% a week earlier.

Stock Highlights

Dollar Tree (DLTR), an operator of more than 6,800 discount retails in the U.S. and Canada, reported better than expected sales and earnings for the most recent quarter. Excluding the impact of 53 weeks in the prior year, sales grew by +4.2% and earnings were higher by +14.9%. Helping fuel these strong numbers is the renovation of Family Dollars stores, stores acquired in a 2014, resulting in above average same-store sales growth. Dollar Tree’s stock was the best performing among the 500 stocks in the S&P 500 with a gain of +6.3%. Other discount retails also saw higher stock prices including Target (TGT) up +3.9% and Costco Wholesale (COST) gaining +3.8%.

The stock of Facebook (FB), the social media giant, was among the best performing in the S&P 500 this week with a gain of +4.5%. The company announced new privacy-focused initiatives that should be good for users but may result in slower revenue and profit growth. Investors initial reaction was clearly positive as demonstrated by the higher stock prices. In spite of the challenges and backlash this company has faced the past year or so, the accompanying graph shows how its stock has just marginally lagged behind the NASDAQ Composite the past 12 months and is higher by +29.4% year-to-date.

Source: www.yahoo.com/finance

Kroger (KR), one of our country’s biggest grocer, reported disappointing quarterly results resulting in its stocks being the worst performer in the S&P 500 for the week. Adjusted earnings per share came in at $0.48 which was below Wall Street estimates of $0.52 on sales that declined -9.5% to $28.1 billion. Results were impacted by an increasingly competitive market and the company’s investment in new online initiatives. The company further gave guidance for 2019 that was below consensus expectations. For the week the stock fell -14.3% and is now lower by -11.0% in 2019.

Healthcare stocks were the worst performing sector this week falling -4.1%. The accompanying table highlights the 5 worst performers with the worst, DaVita (DVA), being a stock owned by legendary investor Warren Buffett. There was no particular news driving the industry lower but there are generally concerns about the regulatory environment and potential changes to the Affordable Care Act that could impact these companies.

Source: www.YCharts.com

Economic Indicator - Reported

The employment report came in far worse than had been expected with the economy adding only 20,000 new jobs in February versus estimates that were closer to 200,000. This is being viewed as another indication that the U.S. economy is slowing following the decade long expansion. This disappointing month does follow are surprisingly strong month in January when the economy added a revised 311,000 jobs. The unemployment rate fell to 3.8%.

On the positive side was fourth quarter productivity, or the amount of output per hour of work, showing an increasing of +1.9%. This was slightly better than the prior quarter and full-year 2018 came in the best since 2010.

New home sales came in meaningfully better than expected at an annualized rate of 621,000 but is -2.4% below a year ago.

Economic Indicators – Upcoming

The following economic data is expected in the coming week: