Weekly Expert Market Perspectives Park Avenue Securities PAS

Stock Market Snaps Back to Record Highs

The stock market rallied to new heights this week, as investors looked past coronavirus concerns and drew support from positive fundamentals. The Nasdaq Composite outperformed with a 4.0% weekly gain, followed by the S&P 500 (+3.2%), Dow Jones Industrial Average (+3.0%), and Russell 2000 (+2.7%).

The prevailing view was that the economy is fine and any negative impact resulting from the coronavirus will be minimal, based on economic actions taken by China, reports of progress being made toward a vaccine, and upbeat U.S. economic data. In other words, the buy-the-dip trade was backed by several positive developments this week.

Ten of the 11 S&P 500 sectors contributed to the advance, especially the information technology (+4.5%) and materials (+4.2%) sectors. The utilities sector (-0.6%) was the lone holdout.

Data showed nonfarm payrolls grow by 225,000 in January (Briefing.com consensus 164,000), the January ISM Manufacturing Index return into expansion territory after five straight months of contraction, the ISM Non-Manufacturing Index accelerate for the second straight month for January, and weekly jobless claims fall to their lowest level in nine months.

China shored up confidence after it injected liquidity into its markets to help offset any impact from the coronavirus and said it will cut tariffs on $75 billion of U.S. imports by 50% on Feb. 14. In addition, reports indicated that the People's Bank of China is planning additional stimulus that will encourage lending activity.

The coronavirus isn't in the rear-view mirror just yet, as some companies like Walt Disney (DIS) and Nike (NKE) said it will have a negative impact on financial results, but the market is optimistic it won't get worse. Apple (APPL) for its part temporarily closed its China stores but shares still rose more than 3% this week.

Tesla (TSLA) was arguably the story stock of the week after shares rose as much as 48.9% in a span of less than two days in a short squeeze. Shares finished the week higher by 15.0%. Separately, Alphabet (GOOG) reported revenue that was below expectations, but shares overcame initial weakness.

U.S. Treasuries finished the week lower, driving yields higher across the curve. The 2-yr yield increased seven basis points to 1.39%, and the 10-yr yield increased six basis points to 1.58%. The U.S. Dollar Index rose 1.3% to 98.69. WTI crude fell 2.4%, or $1.23, to $50.35/bbl, unable to draw enthusiasm from talk of possible OPEC+ production cuts.

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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 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.

2020-94472 (Exp 5/20)