Month: January 2020

Numerous companies reported strong earnings this week, led by Amazon (AMZN). The retail and web services giant beat profit forecasts by 60 percent. Amazon shares gained 7 percent following the news and made a new all-time intraday high. United States Steel (USX) beat consensus estimates by 42 percent, Valero Energy (VLO) by 31 percent, and General Electric (GE) by 17 percent. GE shares rallied nearly 12 percent on the news before finishing the week with an increase of 6 percent.

The broader market declined on the week despite positive earnings. The Nasdaq slipped 1.78 percent. The S&P 500 Index and Dow Jones Industrial Average decreased 2.14 and 2.56 percent, respectively. The Nasdaq still gained 1.98 percent for the month.

Utilities and technology were the best performing sectors in January. XLU rallied 6.67 percent and SPDR Technology (XLK) returned 3.96 percent.

Economic data remains very strong. New home sales increased at an annualized pace of 694,000 in December, close to November’s pace of 697,000. The Conference Board and University of Michigan consumer surveys both recorded rising confidence in January. The former survey climbed to 131.6, the highest reading in 5 months. The latter survey edged up to 99.8, a nine-month high. Both numbers beat consensus estimates.

The Federal Reserve held interest rates steady at its meeting this week. Its policy statement was virtually unchanged from December. Weekly jobless claims were 216,000, still near multi-decade lows.

The U.S. economy grew 2.1 percent in the fourth quarter. This matches economic growth in the third quarter and beat consensus estimates of 1.8 percent growth.

Crude oil ended the week at $51.59 per barrel. The impact from an outage in the Keystone pipeline faded, while global supply and demand imbalance remain a headwind. Natural gas closed at its lowest level since 2016. This week energy analysts dubbed the drop “gasmaggedon” with Bank of America forecasting the average price for 2020 will be below $2 per mmbtu.

Despite strong earnings, the Nasdaq decreased 0.66 percent on the week. The S&P 500 Index declined 0.76 percent and the Dow Jones Industrial Average 1.05 percent. The dip this week lowered the Nasdaq’s return this year to 3.83 percent. The S&P 500 Index has increased 2.01 percent and the Dow 1.60 percent.

Intel (INTC) beat earnings estimates and shares climbed 12.49 percent for the week. The beat helped power the VanEck Semiconductor ETF (SMH) to a gain of 1.01 percent. It also aided SPDR Technology (XLK), which increased 0.21 percent for the week. The best performing sector was utilities thanks to falling interest rates. SPDR Utilities (XLU) advanced 2.56 percent.

Other firms beating earnings this week included International Business Machines (IBM), Proctor & Gamble (PG), Johnson & Johnson (JNJ), American Express (AXP), Netflix (NFLX) and Comcast (CMCSA).

Economic data was light this week. The main data point was flash PMIs on Friday, which were strong. The U.S. composite PMI for January was higher, indicating a strong uptick in service activity. Both Europe and Japan’s manufacturing PMIs also turned higher.

The U.S. Dollar Index increased 0.4 percent this week. iShares MSCI Emerging Markets (EEM) fell 1.40 percent as Chinese stocks declined. iShares China Large-Cap (FXI) declined 2.11 percent. Xtrackers Harvest CSI 300 China A-Shares (ASHR) slid 3.41 percent.

The 10-year Treasury yield slid to a three-month low of 1.68 percent. Corporate and investment grade bonds benefited the most from falling yields. Fidelity Corporate Bond (FCOR) gained 0.68 percent.

Falling yields were also positive for housing shares, which also benefited from strong earnings reports. iShares U.S. Home Construction (ITB) climbed 2.04 percent on the week. ITB recently exceeded its housing bubble high.