Weekly Expert Perspectives PAS

Growth Concerns and Profit Taking

The S&P 500 lost 2.2% this week, as concerns about global growth underpinned a risk-off mindset. With few catalysts to justify further gains, and a confluence of discouraging data, news, and technical drivers, the market succumbed to profit-taking interest after its strong start to the year.

The Dow Jones Industrial Average lost 2.2%, the Nasdaq Composite lost 2.5%, and the Russell 2000 lost 4.3%. 

Nine of the 11 S&P 500 sectors finished lower, led by the energy (-3.9%), health care (-3.9%), and industrial (-2.9%) sectors. Conversely, the real estate (+0.5%) and utilities (+0.7%) sectors were the lone groups to finish higher.

The leading narrative for the market this week was that global growth is slowing and that the market got ahead of itself pricing in economic prospects.

Major developments reinforcing this belief included (1) a surprisingly weak U.S. nonfarm payroll figure, which grew by just 20,000 (Briefing.com consensus 173,000); (2) the European Central Bank (ECB) issuing a dovish-minded policy stance; (3) 2019 GDP growth forecast cuts from the OECD, ECB, and China; and (4) slight-to-moderate growth for 10 of the 12 Fed districts, indicated in the Fed's Beige Book for March.

Likewise, there were growing concerns about the prospects for a U.S.-China trade deal.

U.S. Ambassador to China, Terry Branstad told The Wall Street Journal that a date has not yet been set for a summit because neither side feels an agreement is imminent. Separately, President Trump said if a China trade deal is "not a great deal," he will not make one, and that the U.S. will do well with or without a China trade deal.

There were some technical drivers in play, too. The S&P 500's inability to sustain a retest of its November high and stay above the 2800 level exacerbated selling efforts that sent the benchmark index below its 200-day moving average. The Nasdaq Composite, Russell 2000, and Dow Jones Transportation Average also fell below their 200-day moving averages. 

The U.S. Treasury market exhibited a flight-to-safety trade, which drove yields notably lower after making notable moves higher in the prior week. The 2-yr yield dropped 11 basis points to 2.44%, and the 10-yr yield dropped 13 basis points to 2.63%. The U.S. Dollar Index Index rose 0.9% to 97.36. WTI crude lost 0.6% to $56.14/bbl.

To download the printable version, CLICK HERE.

Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

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 an indirect, 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.

Provided by Briefing.com

2019-76103 (Exp 07/19)

Top