2/26/20 Market Notes
Stocks attempted a rebound on Tuesday, as the Dow Jones Industrial Average gained 188 points in the first hour of trading, before relinquishing gains to end 840 lower. The S&P 500 and NASDAQ had similar 3% losses, while the small cap Russell 2000 index declined 3 ½%. A warning by the Center for Disease Control (CDC) that the coronavirus is spreading more quickly than previously estimated and is approaching ‘pandemic’ levels initiated the sharp sell-off. Safe haven assets did not perform well across the board, as gold prices ended 2.15% lower, while Bond prices rose as the benchmark Ten Year Treasury Yield hit a record low 1.32%. The U.S. dollar was mixed against major currencies, and oil prices ended below $50 per barrel. Economic news for January was solid enough, as home prices rose a more than forecast 3.8%, and Consumer Confidence remained very high – albeit missing projections slightly. The question plaguing investors is ‘how much will this (the coronavirus) impact earnings?’ Since the beginning of the year, analysts have decreased their Q1 earnings forecast from +4.5% to +1.2%, with more downward revisions almost certain. While all sectors of the economy are likely to feel the economic impact of the coronavirus, those with less macro exposure are likely to fair best. To Wit: to date, the financial and utilities sectors have had the least amount of downward earnings growth revisions, while the Consumer Discretionary, Energy and Materials sectors have seen the most downward revisions. European and Asian markets are off sharply overnight, while U.S. premarket equity futures are pointing to a flat open.
Disclosures: This market commentary is written by the 1879 Advisors and represents the views of 1879 Advisors. This commentary is not investment advice and should not be used as a basis to make investment decisions. Please consult with your registered investment advisor before making any investment decisions.