Market losses and distribution days are beginning to add up. The spread of the deadly coronavirus continued to fuel a meaningful trade lower last week – particularly on Friday.
The S&P 500 lost 1.9% and for the first time since October of last year it has set up for a test of its 50 DMA. I expect that test to fail today.
The Dow Industrials faired even more poorly last week and Friday, specifically, losing 2.1%. Unlike the S&P 500, the Dow actually closed below its 50 DMA. The move by the S&P 500 and Dow Industrials last week erased the YTD gains for both indices.
Though the Nasdaq Composite has faired marginally better than the S&P 500 and Dow Industrials thus far in 2020 (+2.0%), there are signs that the Nasdaq may succumb to significant selling pressure this week – allowing for a negative YTD performance by week’s end.
Rounding out the major indices, the Russell 2000 has traded in lockstep with its more closely watched competitors lower in recent trading sessions – allowing for a close on Friday that was well below its respective 50 DMA. Leadership lower by the Russell 2000 is an indication that risk-off has emerged as a dominant equity market theme.
As if to underscore the risk-off trade that has gripped equity markets in recent sessions, volume on the NYSE and Nasdaq have both risen sharply. On Friday the NASDAQ volume rose 10.28% from Thursday’s session. Volume on the NYSE rose a stunning 20.02%. Institutional selling has taken hold.
Recommended to Kenny’s Commentary readers
How $22 BLN energy asset manager Tortoise is investing in the global energy evolution.
Tortoise Advisors (click for podcast)
This podcast explores:
The transformation of utilities worldwide to de-carbonize the power generation mix
As the power generation mix shifts, utility companies are de-risking their business models
Attractive characteristics of renewable energy sources
Last week’s economic calendar highlights:
New home sales for December of 2019, released on Monday at 10:00 am, were underwhelming. Not only were December’s figures lighter than Econoday consensus, (694k vs 728k), November’s results were revised lower as well. November’s revised totals were 697k down from an initial reading of 719k.
The EIA Petroleum Status Report for the week ending 1/24, did not disrupt our recent relative equilibrium between supply and demand. Crude oil inventories rose 3.5 M bbl, gasoline inventories rose a scant 1.2 M bbl, and distillate inventories tightened by 1.3 M bbl.
Not unexpectedly, the Federal Reserve stood pat on Rates in their FOMC announcement on Wednesday. Fed Chair Powell’s comments were within thematic expectations for the street.
Weekly Jobless Claims figures for the week ending 1/25 were 216k versus Econoday consensus of 215k.
Personal incomes and outlays data for December were in-line with expectations – income M/M was 0.2%; spending was 0.3%. Core price data remains tame and fractionally below Fed target.
Though last week’s economic data did not provide any data-centric landmines for investors, the data did leave them a bit underwhelmed and uninspired – particularly in light of the headwinds and principle driver of price direction, the coronavirus.
This week’s economic calendar highlights:
The most closely watched release of the week comes on Friday morning – the monthly Employment Report for January. Non-farm payrolls M/M are expected to reflect a gain of 151k. The unemployment rate, 3.5%, is expected to remain unchanged. All of the other verticals in the report are expected to remain in channel with recent employment reports.
Regardless of what this week’s economic calendar or earnings calendar deliver for investors, that data will play second fiddle to coronavirus cases/fatality updates and the resultant impact on travel, trade, and commerce.