Weekly Expert Market Perspectives Park Avenue Securities PAS

Stock Market Hits New Highs Mid-Week but Sells Off at the End

The S&P 500 (-1.3%) and Nasdaq Composite (-1.6%) set new intraday and closing records this week as investors remained unconcerned by the coronavirus, but stocks sold off to end the week amid a pervasively defensive tone. The Dow Jones Industrial Average lost 1.4%, and the Russell 2000 lost 0.5%. 

The week started with Apple (AAPL), the world's largest technology company by market cap, providing a revenue warning for the March quarter due to the coronavirus. Shares recouped initial losses a day later, as investors viewed the situation as temporary and China-specific, but it was hard to ignore the widening spread of the virus and the defensive positioning in the market. 

U.S. Treasuries, gold ($1649.90, +67.20, +4.3%), and the CBOE Volatility Index (17.08, +3.40, +24.9%) advanced noticeably during the week, and barely moved even when the market hit new highs and momentum stocks like Tesla (TSLA) and Virgin Galactic (SPCE) extended their parabolic runs. Part of the defensiveness could be attributed to the elevated valuations in the market clashing with growth risks due to the coronavirus.

Cyclical sectors, and mega-cap stocks, underperformed, with the S&P 500 information technology (-2.5%), financials (-1.3%), and industrials (-1.2%) sectors leading the retreat. The defensive-oriented real estate sector (unch) was the lone group to avoid a weekly loss. 

If one were to remain constructive on the market, one could point to this week's upbeat economic data. Building permits climbed to a near 13-year high in January, weekly jobless claims remained at low levels, and the Philadelphia Fed Index surged to 36.7 in February (Briefing.com consensus 10.7) from 17.0 in January. The data wasn't enough to prevent this week's profit taking, though.

The 2-yr yield declined seven basis points to 1.35%, and the 10-yr yield declined 11 basis points to 1.47%. The U.S. Dollar Index closed 0.2% higher to 99.32 after setting a three-year high (99.61) during the week. WTI crude rose 2.8%, or $1.44, to $53.37/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.

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2020-95350 (Exp 5/20)