Weekly Expert Market Perspectives Park Avenue Securities PAS

Wall Street Inflicted by a Virus

Stocks struggled to fend off coronavirus headlines and overvaluation talk during this holiday-shortened trading week. The S&P 500 (-1.0%), Dow Jones Industrial Average (-1.2%), and Nasdaq Composite (-0.8%) set new highs mid-week but were hit with noticeable losses on Friday. The Russell 2000 continued to underperform with a 2.2% weekly decline. 

A new strain of coronavirus originated in Wuhan, China and forced the country to lock down several cities right before the Lunar New Year festivities. There were two confirmed cases in the U.S., one in Seattle and the other in Chicago, but the World Health Organization did not declare an international virus alert or public health emergency.

There were concerns that economic activity would slow down, as well as earnings growth as a result, which provided sellers a convenient excuse to sell a market some think is overvalued. Growth concerns were manifested in the 7.4% weekly drop in WTI crude ($54.21/bbl, -$4.34), the advance in Treasuries, and the heavy losses in the cyclical energy (-4.3%), materials (-2.3%), and financials (-2.2%) sectors.

Conversely, the rate-sensitive utilities (+2.4%) and real estate (+1.0%) sectors finished comfortably higher amid the decline in yields. The information technology sector (+0.3%) followed suit, thanks to earnings-driven gains in IBM (IBM) and Intel (INTC). Shares of Intel surged 8% on Friday. 

Staying in the semiconductor space, Bloomberg reported that Apple (AAPL) will begin producing low-cost iPhones next month and asked Taiwan Semi (TSM) to increase its chip supply to meet strong iPhone demand. Broadcom (AVGO) reached two, separate multi-year agreements with Apple to supply it with high-performance wireless components and modules.

Other notable stories included Tesla (TSLA) reaching a $100 billion market-cap valuation, Comcast (CMCSA) saying it expects video subscriber losses to increase in 2020, and Boeing (BA) delaying its 737 MAX timeline to mid-2020. A report on Friday indicated the FAA could approve the 737 MAX before mid-year, though. 

The U.S. Treasury market experienced some curve-flattening activity. The 2-yr yield dropped eight basis points to 1.48%, and the 10-yr yield dropped 16 basis points to 1.68%. The U.S. Dollar Index advanced 0.3% to 97.86. 

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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.

2020-93408 (Exp 4/20)