Closing Comment — March 27, 2020
DJIA: 21,636.78, down 915.39
S&P 500: 2,541.47, down 88.60
Nasdaq Composite: 7,502.38, down 295.16
Stocks End Lower, but Post Weekly Gains
Stocks pulled back on Friday from their best three-day winning streak since the 1930s, as investors continued to assess the economic impact of the coronavirus outbreak. Sentiment dampened after the U.S. surpassed China as the country with the most COVID-19 cases, with New York reporting more than 7,000 new infections. Equities attempted to pare losses after the House quickly passed the $2 trillion stimulus package, but the sell-off deepened after the Fed announced it would slow Treasury purchases next week. The Dow fell 915 points, but managed to notch its best week since 1938 with a 12.8% gain. The S&P 500 fell 3.4%, but rose 10.3% for the week. The Nasdaq Composite slipped 3.8%, trimming its weekly advance to 9.1%.
Ten of 11 S&P 500 sectors ended in negative territory, with the Utilities group the lone advancer. The Energy sector led decliners with a 6.9% retreat as WTI crude prices notched a fifth straight week of losses. Industrials also lagged with Boeing falling 10.1% after Treasury Secretary Mnuchin noted the company would not be using federal funds. In earnings, Lululemon lost 5.6% after failing to provide full-year guidance for 2020, saying online sales growth will not offset store closures.
On the data front, the core PCE deflator, which is the Fed’s preferred proxy of inflation, rose 1.8% year-over-year in February. Separately, a report from the University of Michigan showed March consumer sentiment tumbled to its lowest level since October 2016. Treasuries advanced, with the yield on the 10-year note down 14 basis points to 0.68%.
Midday Comment — March 27, 2020
DJIA: 21,696.30, down 855.87
S&P 500: 2,537.27, down 92.80
Nasdaq Composite: 7,520.43, down 277.10
Equities Decline on Virus Fears
U.S. equities are declining Friday, putting a halt to the steepest three-day rally in 90 years as investors continue to assess the economic impact of the coronavirus outbreak. Sentiment is being dampened after the U.S. surpassed China as the country with the most COVID-19 cases, with New York reporting more than 7,000 new infections overnight. The Dow is losing 855 points, giving back roughly one-fifth of its 21.3% three-day rally. The S&P 500 is down 3.5%, but is still on pace for its best week since 2009. The Nasdaq Composite is slipping 3.6%.
On Capitol Hill, the House is in the process of passing the $2 trillion spending package to help offset the economic fallout from the coronavirus outbreak. President Donald Trump, has pledged to sign the bill “immediately” after passing.
All 11 S&P 500 sectors are in negative territory. The Energy sector is leading declines as WTI crude heads for its fifth straight week of losses. Meanwhile, the traditionally more defensive sectors (Utilities, Consumer Staples, and Real Estate) are outperforming on a relative basis, being the only sectors to decline less than 2.0%. In earnings, Lululemon is losing 6.4% after failing to provide full-year guidance for 2020, saying online sales growth will not offset store closures.
On the data front, the core PCE deflator, which is the Fed’s preferred proxy of inflation, rose 1.8% year-over-year in February. Separately, a report from the University of Michigan showed March consumer sentiment tumbled to its lowest level since October 2016. Treasuries are advancing, with the yield on the 10-year note down nine basis points to 0.73%.
Opening Comment — March 27, 2020
DJIA: 22,552.17
S&P 500: 2,630.07
Nasdaq Composite: 7,797.54
U.S. Futures Point to Lower Open Friday
U.S. futures are pointing to a lower open on Friday, as investors continue to assess the economic impact of the coronavirus outbreak. The U.S. surpassed China as the country with the most COVID-19 cases, as the number of global infections top 500,000. The Dow is falling 2.6%, while the S&P 500 and Nasdaq 100 are both down 2.3% in pre-market action.
The early losses follow yesterday’s upbeat session, in which the Dow surged 1,351 points and the S&P 500 rallied 6.2%, with both benchmarks notching their best three-day performance since the 1930s. The rally came as Investors shook off a record high initial jobless claims figure (3.3 million) after the Senate unanimously passed a $2 trillion spending package to help citizens and businesses deal with the economic fallout from the coronavirus outbreak.
On the data front, the PCE deflator, which is the Fed’s preferred proxy of inflation, rose 0.1% in February, and 1.8% compared to a year ago. The core figure (ex- food and energy) climbed 0.2% for the month and 1.8% year-over-year. Separately, personal spending and income gained 0.6% and 0.2%, respectively in February. Treasuries are advancing, with the yield on the 10-year note down six basis points to 0.76%.
In earnings, Lululemon is losing 3.9% after failing to provide full-year guidance for 2020, saying online sales growth will not offset store closures. KB Home is up 3.5% after topping earnings and revenue estimates. Overseas, China’s Shanghai Composite added 0.3%, while Japan’s Nikkei 225 jumped 3.9% overnight. The Euro STOXX 600 is down 3.2% near midday, while the FTSE 100 is losing 4.8%.