Weekly Expert Market Perspectives Park Avenue Securities PAS

Coronavirus Outbreak Causes More Widespread Selling

The stock market fell for the second straight week, as the continued outbreak of the coronavirus dampened risk sentiment and raised concerns about growth prospects. The S&P 500 (-2.1%), Dow Jones Industrial Average (-2.5%), and Russell 2000 (-2.9%) dropped more than 2%, while the Nasdaq Composite (-1.8%) fared slightly better.

The Nasdaq was the lone index to close the month higher (+2.0%). Losses were made most prevalent in the S&P 500 energy (-5.7%), materials (-3.5%), and health care (-3.3%) sectors. The consumer discretionary (+0.1%) and utilities (+0.8%) sectors finished higher, but the 7% post-earnings gain in Amazon (AMZN) helped mask the weakness in the consumer discretionary space.

Although investors tried to dismiss the seriousness of the coronavirus amid several buy-the-dip efforts, the virus was ultimately impossible to ignore. Reports proliferated about the rising death toll in China, the reduced economic activity in the region, the first confirmed case of a person-to-person transmission of the virus in the U.S., and the growing cases around the world.

The World Health Organization declared a global health emergency but did not recommend restricting the movement of people and goods since evidence showed it may be ineffective. That didn't stop President Trump from enacting temporary travel restrictions or Delta Air Lines (DAL), United Airlines (UAL), and American Airlines (AAL) from suspending U.S.-China flights, though.

The underlying view was that a reduction in global economic activity would adversely impact the earnings expectations that lofty stock valuations have been predicated on. Others viewed the virus as a convenient excuse to take profits from a market that had gotten too overextended.

There were plenty of discouraging earnings news that fed into the growth concerns, too. Facebook (FB), Caterpillar (CAT), Visa (V), UPS (UPS), 3M (MMM), Pfizer (PFE), and DuPont (DD) were among the many disappointments. Tech titans Apple (AAPL) and Microsoft (MSFT), however, did report strong results.

Separately, the Fed left the target range for the fed funds rate unchanged at 1.50-1.75% and extended repurchase operations though at least April. The latter was perhaps the only surprising thing to come out of the policy meeting.

U.S. Treasuries ended the week with more gains amid the growth concerns. The 2-yr yield and the 10-yr yield dropped 16 basis points each to 1.32% and 1.52%, respectively. The U.S. Dollar Index declined 0.5% to 97.37. WTI crude fell 4.9%, or $2.63, to $51.58/bbl.

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Data and rates used were indicative of market conditions as of the date shown and compiled by Briefing.com. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

2020-93872 (Exp 4/20)