2/4/20 Market Notes
After Friday’s sharp sell-off, which put major U.S. stock indexes into negative territory for the month of January, equities rebounded a bit to start the month of February. The Dow Jones Industrial Average ended 143 points higher, or roughly ½%, while the S&P 500 rallied ¾% and the NASDAQ gained 1.34%. Eight of the eleven sectors of the S&P ended higher, as the energy sector fell more than 1% as oil prices tumbled to near $50 per barrel, more than 20% off their recent highs. Treasury yields move marginally higher, as investors remained guarded about the economic impact of the coronavirus and ahead of the Iowa caucus. Looking beyond our own shores, most major equity markets rose, with the notable exception of the Chinese Shanghai index, which fell about 7%. Overnight, European and Asian bourses are up about 1%, while U.S. premarket equity futures are also pointing to a strong open.
While the focus has been on the coronavirus, investors should not lose sight of the fourth quarter earnings season. According to the research firm FactSet, through this past Friday nearly half of the constituents of the S&P 500 have reported earnings, of these 69% have exceeded earnings estimates and 65% have surpassed revenue projections. On a blended basis, earnings are down 0.3% year over year, making it the fourth consecutive quarterly earnings decline in a row. However, earnings are projected to grow by 9% for calendar year 2020, a lofty figure that is likely to be adjusted downward (as is typically the case). None-the-less, a midsingle digit earnings growth rate coupled with sustained low interest rates and decent economic growth are likely sufficient to drive positive equity returns for the year.
Ford (F) and The Walt Disney Company (DIS) are amongst the 128 companies reporting fourth quarter earnings today. On the economic front, market participants will get the latest Factory Orders report.
Disclosures: This market commentary is written by the 1879 Advisors Investment Committee 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.