Market Performance Summary

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

Notable Market Headlines

Stocks rallied around the world with international emerging markets leading the way in spite of multiple economic reports continuing to show a slowing economy. At the close of the week U.S. large stocks were higher by +3.0% as measured by the S&P 500. The Dow Jones Industrial average was higher by just +1.6%, a much weaker performance, due to the sharp drop in Boeing’s (BA) stock. Technology stocks continue to be the leaders in 2019 with the NASDAQ gaining +3.6% this week.

Small U.S. stocks lagged behind large stocks for the week but still gained +2.1%. This underperformance raises questions about the health and concern about the U.S. economy as more small companies tend to have a higher concentration of domestic business. Year-to-date though small stocks continue to outpace large higher by +15.6% versus large stocks up +12.6%.

International stocks performed well this week with developed markets higher by +2.8%. In the Eurozone, surprisingly, the U.K. market has the best year-to-date performance of +13.9% in spite of the chaos of Brexit. The two largest Eurozone markets, France and Germany, have gained +13.4% and +8.8% respectively in 2019.

Emerging markets jumped +3.5% for the week but are still trailing behind other regions in the world for the year up just +10.3%. The strongest of the emerging markets this week were China, up +4.0%, and Brazil gaining +4.9%.

The non-traditional asset classes lagged behind this week but two of the three have had a strong 2019 so far. Both real estate and commodities gained +1.9% for the week and are higher by +14.1% and 13.2% respectively year-to-date. As the accompany graph shows, since the market hit its higher on September 20th last year, large U.S. stocks are still -4% below their highs while during the same period real estate stocks are about +5% above September 20th levels. Commodities have not recovered from September 20th levels either but, as the graphs shows, gold prices were little impacted by the fourth quarter drop and have continued inching higher.

Source: www.YahooFinance.com

Bond prices were higher with yields continuing to move lower as concerns about the slowing economy mount. The 10-year U.S. Treasury yield closed the week at 2.592% which is the lowest yields since the first week of the year.

Stock Highlights

NVIDIA (NVDA), a computer chip manufacturer, had the best performing stock among the S&P 500 this week. This company benefited greatly from the cryptocurrency boom as its chips were among the most popular for mining crypto. The collapse in the price of cryptocurrency has dramatically impacted the demand for its chips resulting in declining revenue and its stock getting cut by more than -56% in late 2019. It has seen a strong rebound though in 2019 with a gain of +27.2% including this week’s +12.7% rally.

Source: www.YahooFinance.com

Devon Energy (DVN), an oil exploration and production company, benefited from a more than $2 rally in the price of oil this week. Other stocks in this sector, such as Baker Hughes (BHGE) and Noble Energy (NBL), also rallied. These stocks can be volatile and risky, like most others of course, with Devon hitting a high mid last year above $45, falling to $21 at the lows for the market in late December, and now back just below $30…a gain of +41% from the lows. This week Devon’s stock was the second best performing among the S&P 500 gaining +11.3%.

Boeing (BA), one of the largest aircraft manufacturers in the world with more than $100 billion in annual revenue, had the worst performing stock in the S&P 500 this week losing -10.3%. The second crash of its 737 MAX leading to the grounding of all such aircraft worldwide puts in jeopardy one of the company’s best-selling and most profitable planes. The company has been through similar challenges in the past but two similar accidents with the same plane certainly has raised fears among investors. In spite of this week’s price drop, Boeing’s stocks is still higher year-to-date by +17.5%.

Economic Indicator - Reported

January Retails Sales grew by +0.2% topping the very conservative economists’ consensus estimate of +0.1%. Disappointing though was the revision lower to December’s number to -1.6% from the previously reported -1.2%. There has been debate and questioning as to whether the December number accurately reflects the economy given other reports showing very different results. Regardless this report seems to be suggesting a slowing consumer.

New Home Sales slowed to an annualized 607,000 from the previous month’s revised higher number of 652,000. Not only is this month’s activity slower than December’s but it is also down -4.1% from the prior year. The Midwest region saw the biggest drop, down -28.6% from December, while activity in the West was up +27.8%.

The Consumer Price Index (CPI) continues to show modest inflation up just +0.2% in February as expected. The year-over-year gain is +1.5% but when excluding the volatile food and energy groups prices have risen +2.2%. For investors, none of this should put any pressure on the Federal Reserve regarding interest rates. The Producer Price Index (PPI) was up just +0.1% for the month.

Consumer Sentiment came in above the top end of the range forecast by economists at 97.8 and is meaningfully higher than last month’s reading of 93.8.

Economic Indicators – Upcoming

The following economic data is expected in the coming week: