Market News – March 9, 2020

WILD WEEK (THAT ENDED POSITIVE):  This was a week of wild ups and downs.  Panic and greed showed up in force on alternative days.  After the panic, people who wanted to “buy the dip” showed up, and on it went.  Coronovirus has brought us sufficient uncertainty to create days of panic selling.  On Monday, after seven days of panic selling, U.S. stock markets had their bet single day in a decade, largely fueled by confidence that worldwide central banks would respond aggressively to the negative economic consequences caused by coronovirus.  On Tuesday the Federal Reserve Bank announced an emergency rate cut of one half of one percent, and U.S. markets responded poorly, falling 3% approximately.  On Wednesday, investors seemed assured by some of the coordinated global responses to the disease and by the results from Super Tuesday (Biden Bounce?).  The S&P 500 climbed over 4%.  On Thursday and Friday, virus anxiety returned and the S&P 500 fell over 3% and 1.7% respectively.  When all was said and done, the S&P 500 was up 0.65% for the week.  See the weekly statistics below. Note that if you have a diversified portfolio, the bond portion is doing what it is supposed to be doing right now.

CORONAVIRUS:  There are a lot of people making predictions about the coronavirus, but uncertainty seems to be the only thing that is certain about how it will spread at this point.  I highly recommend going to this site for current statistics on the coronavirus as tracked by Johns Hopkins University and reported by Worldometer..  As I said last week, I’ve been watching the “active cases” statistic very closely.  In mid-February, active cases topped at nearly 60,000 (total cases minus deaths and recoveries)  Since then, despite the growing number of countries reporting victims, the number of active cases had gradually decreased every day until March 4 when it started to tick up again.  China’s rate of spread has decreased dramatically after drastic measures, and now Italy and Iran, two countries where the spread is greatest, are taking similar actions.

FED ANNOUNCED EMERGENCY RATE CUT:  For the first time since 2008, the Federal Reserve cut rates by a half of a percent.  In announcing the cut, Fed Chairman Powell stated, “The magnitude and persistence of the overall effect on the U.S. economy remain highly uncertain and the situation remains a fluid one…Against this background, the committee judged that the risks to the U.S. outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy.”

STRONG FEBRUARY JOBS REPORT: In February the U.S. economy added 273,000 new jobs.  The unemployment report fell to 3.5%.  The services sector was strong once again, but what was more encouraging was that the manufacturing sector added jobs for the first time in three months.  Average hourly earnings for February were 3% higher than a year ago.

U.S. MORTGAGE RATES HIT A RECORD LOW:  On Thursday, the average rate on a 30-year fixed rate mortgage fell to 3.29%, its lowest level on record.  Such a move generally spurs home sales, but will coronavirus fears keep buyers on the sidelines this spring?  Refinancing activity jumped 26% from the week before.

THE U.S. SERVICE ECONOMY KEPT GROWING IN FEBRUARY:  The services sector of the U.S. economy grew for the 121st consecutive month in February according to the nation’s purchasing and supply executives as measured by the Non-Manufacturing ISM report®.  The index came in at a score of 57.3%, a 1.8% increase from the prior month.  Scores above 50.0% indicate growth.

REFERENCES:
THE U.S. SERVICE ECONOMY KEPT GROWING IN FEBRUARY:  https://www.calculatedriskblog.com/2020/03/ism-non-manufacturing-index-increased.html\FED ANNOUNCED EMERGENCY RATE CUT https://www.cnbc.com/2020/03/03/fed-cuts-rates-by-half-a-percentage-point-to-combat-coronavirus-slowdown.html