Sector Investing

[ReturntoSender]

Down Week Ends in Volatile Fashion
28-Feb-20 16:15 ET
Dow -357.28 at 25409.33, Nasdaq +0.89 at 8567.37, S&P -24.54 at 2954.22

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The stock market put up a bit of a fight on Friday, but when the dust settled, it was still the worst week for equities since late 2008, as the S&P 500 (-0.8%) surrendered 11.5% since last Friday.

The benchmark index recorded its seventh consecutive day of losses, falling to its lowest level since early October as coronavirus-related fears kept participants on edge. Today's action saw a sharply lower start, followed by an intraday churn as the market attempted a rebound after more than a week of losses.

The intraday rebound was fueled by relative strength in semiconductor stocks, but that strength was fleeting. The PHLX Semiconductor Index started the day with a 3.8% loss, flashed a 2.9% gain in late morning trade, returned to its flat line in the afternoon, but rallied during the final minutes of trade to end higher by 2.2%. The final push helped the Nasdaq inch into positive territory by the close.

Various U.S. officials offered reassurances throughout the day, but their comments did little to dispel the uncertainty associated with a disease that has a long incubation period and a seemingly high propensity to spread. The World Health Organization, for its part, raised its risk assessment of COVID-19 to "very high."

Afternoon action saw the release of the following statement from Fed Chairman Jay Powell: "The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."

Besides the mention of the coronavirus, the statement was essentially a carbon copy of comments that Fed Chairman Jay Powell has been making throughout his tenure. The softly worded statement was particularly underwhelming because it was drowned out by a screaming bond market. The 10-yr yield fell another 17 basis points to a fresh record low of 1.13% while the 30-yr yield slid 11 basis points to 1.67%. Up front, the 2-yr yield fell 22 basis points to 0.88%. Thanks to these moves, the day ended with the fed funds futures market pointing to a 96.0% implied likelihood of a 50-basis point rate cut in March, followed by a 74.0% implied probability of another 25-basis point rate cut in April.

Eight out of eleven sectors ended the day in negative territory with losses ranging from 0.8% (consumer discretionary) to 3.3% (utilities). Interestingly, the utilities sector was the day's weakest performer, suggesting a strong desire to raise cash. That is also the likely reason behind a sharp drop in prices of metals. Gold fell 4.5% while palladium got decimated after surging 45.9% for Q1 going into today.

AES Corporation (AES 16.73, -1.56, -8.5%) was the weakest performer in the S&P 500 despite beating EPS estimates. Conversely, Cimarex (XEC 33.05, +2.40, +7.8%) was the top S&P 500 performer as the energy sector (+1.3%) displayed relative strength.

There was continued confusion related to the provider of videoconferencing software Zoom Video (ZM 105.00, -8.55, -7.5%). The stock fell sharply while shares of defunct company Zoom Technologies (ZOOM 6.75, +1.25, +22.7%) were up more than 63.0% before pulling back. The stock surged more than 140.0% this week.

The CBOE Volatility Index (VIX 39.98, +0.82, +2.1%) was up more than ten points at its highest point, but returned to little changed in the late afternoon.

Today's trading volume was well above average as 2.5 billion shares changed hands at the NYSE floor.

Reviewing today's economic data:

Personal income in January was up a stronger than expected 0.6% (Briefing.com consensus 0.4%), personal spending was up a weaker than expected 0.2% (Briefing.com consensus 0.3%), the PCE Price Index and core PCE Price Index, which excludes food and energy, were both up 0.1% when each was expected to be up 0.2%. On a yr/yr basis, the PCE Price Index was up 1.7%, versus 1.5% in December, and the core PCE Price Index was up 1.6%, versus 1.5% in December.
The key takeaway from the report is that it continues to show subdued inflation pressure, which might mean something for the Fed if it is worried about demand destruction in coming months, like the capital markets seem to be, due to the coronavirus.
The University of Michigan Index of Consumer Sentiment for February was revised to 101.0 (Briefing.com consensus 100.8) from the preliminary reading of 100.9. The final reading was close to matching the 101.4 expansion peak seen in March 2018.
The key takeaway from the report is that the coronavirus issue had still not permeated the consumer's mindset, although mentions of the virus were picking up as the month was drawing to a close and reporting on the issue was increasing.
The Chicago PMI increased to 49.0 in February from 42.9 in January.
The advance goods trade deficit totaled $65.50 bln in January after a $68.7 bln deficit in December.
Advance retail inventories increased 0.3%% in January after increasing 0.1% in December.
Advance wholesale inventories decreased 0.2% in January after decreasing 0.3% in December.

Monday's economic data will be limited to the 10:00 ET release of January Construction Spending (Briefing.com consensus 0.7%; prior -0.2%) and the February ISM Manufacturing Index (Briefing.com consensus 50.3; prior 50.9).

Nasdaq Composite -10.5% YTD
S&P 500 -11.5% YTD
Dow Jones Industrial Average -12.4% YTD
Russell 2000 -12.7% YTD

Market Snapshot
Dow 25409.33 -357.28 (-1.39%)
Nasdaq 8567.37 +0.89 (0.01%)
SP 500 2954.22 -24.54 (-0.82%)
10-yr Note +1 6/32 1.127
NYSE Adv 699 Dec 1899 Vol 2.46 bln
Nasdaq Adv 1182 Dec 2084 Vol 5.25 bln

Industry Watch
Strong: Technology, Energy
Weak: Utilities, Financials, Consumer Staples, Health Care, Materials

Moving the Market

Coronavirus-related fears remain in place, but stocks try to bounce

10-yr yield and 30-yr yield hit fresh record lows

Crude Oil Nears 2018 Low
28-Feb-20 15:25 ET
Dow -737.69 at 25028.92, Nasdaq -142.69 at 8423.83, S&P -69.77 at 2908.99

[BRIEFING.COM] The S&P 500 remains lower by 2.3% with 30 minutes remaining in the session. The benchmark index is currently down 12.6% for the week.

The energy sector (+0.1%) is hanging onto a slim gain at this juncture while technology (-1.1%) is back in the red after a pullback in chipmaker stocks. The PHLX Semiconductor Index, however, remains higher by 0.2%.

In commodities, WTI crude ended today's pit session lower by $2.44, or 5.2%, at $44.80/bbl. The energy component surrendered $8.54, or 16.0%, this week, falling to levels from late 2018 with the 2018 low looming at $42.36/bbl.