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End of Day Briefing - Thursday Feb 13, 2020

Stocks slip from record highs following spike in reported coronavirus cases
13-Feb-20
Dow -128.11 at 29423.22, Nasdaq -13.99 at 9711.99, S&P -5.51 at 3373.94

[BRIEFING.COM] The stock market slipped from record highs on Thursday following a spike in reported coronavirus cases in China, but it did close well off session lows. The S&P 500 lost 0.2%, the Dow Jones Industrial Average lost 0.4%, and the Nasdaq Composite lost 0.1%. The Russell 2000, however, increased 0.3%. 

The news was particularly disappointing because reports over the past few days had indicated that the rate of new cases was slowing down. The surge may have been due to a new diagnostic procedure, but White House officials reportedly remained skeptical of China's information, thinking Beijing is still underreporting cases. 

The S&P 500, which was already up 4.8% in February, only declined as much as 0.6% today. This wasn't a move that suggested investors were fearful, but instead reflected a subdued risk sentiment given how far the market had come in a short period of time. Of course, the coronavirus remains a risk, especially for U.S. companies with Chinese exposure.

Given its resiliency, though, investors turned defensive and boosted demand for stocks within the S&P 500 utilities (+1.0%), consumer staples (+0.6%), and real estate (+0.5%) sectors. The industrials (-0.7%) and health care (-0.5%) sectors underperformed.

Cisco Systems ($CSCO 47.32, -2.61, -5.2%) was a notable laggard following its earnings report, while PepsiCo ($PEP 146.47, +0.39, +0.3%) and Applied Materials ($AMAT 67.37, +2.00, +3.1%) closed at record highs following their results. Tesla ($TSLA 804.00, +36.71, +4.8%) outperformed after announcing a $2 billion common stock offering.

In other news, the Federal Reserve Bank of New York will reduce the size of its overnight and term repurchase operations, according to Bloomberg. A judge reportedly placed a temporary block on Microsoft's ($MSFT 183.71, -1.00, -0.5%) Pentagon cloud contract award following a lawsuit from Amazon ($AMZN 2149.87, -10.13, -0.5%).

U.S. Treasuries finished mixed and little changed. The 2-yr yield increased one basis point to 1.45%, while the 10-yr yield declined one basis point to 1.62%. The U.S. Dollar Index increased 0.1% to 99.10. WTI crude rose 0.5%, or $0.23, to $51.40/BBL. 

Reviewing Thursday's economic data:

  • According to the BLS, the Consumer Price Index (CPI) increased just 0.1% m/m in January (Briefing.com consensus +0.2%) while core CPI, which excludes food and energy, increased 0.2%, as expected. The monthly increases left total CPI up 2.5% yr/yr, versus 2.3% in December. That is the largest yr/yr increase since October 2018. Core CPI was up 2.3% yr/yr for the fourth straight month.
    • The key takeaway from this report is that it won't spark any undue inflation/rate-hike concerns in the market given the stability of core CPI and the Fed's seeming willingness to let inflation run a little hot to prevent inflation expectations from slipping too much.
  • For the week ending February 8, initial claims increased by 2,000 to 205,000 (Briefing.com consensus 212,000). Continuing claims for the week ending February 1 decreased by 61,000 to 1.698 million.
    • The key takeaway from the report is that it shows U.S. employers still aren't anticipating any lasting demand shocks related to the coronavirus; otherwise, one might be seeing a spike in initial claims -- a leading indicator -- along with the spike in diagnosed cases.

Looking ahead, investors will receive the following reports on Friday: Retail Sales for January, Industrial Production and Capacity Utilization for January, Import and Export Prices for January, Business Inventories for December, and the preliminary University of Michigan Index of Consumer Sentiment for February. 

  • Nasdaq Composite +8.2% YTD
  • S&P 500 +4.4% YTD
  • Dow Jones Industrial Average +3.1% YTD
  • Russell 2000 +1.5% YTD

Market Snapshot

Dow29423.22-128.11(-0.43%)
Nasdaq9711.99-13.99(-0.14%)
SP 5003373.94-5.51(-0.16%)
10-yr Note +1/321.609
NYSEAdv 1426 Dec 1444 Vol 816.7 mln
NasdaqAdv 1669 Dec 1540 Vol 2.2 bln

Industry Watch

Strong: Utilities, Consumer Staples, Real Estate
Weak: Industrials, Health Care, Energy

Moving the Market

-- China reported large spike in new coronavirus cases; market recouped a bulk of opening losses, though

-- Relative strength in the defensive-oriented sectors

-- An appreciation for the fact that the S&P 500 was up 4.8% over the last eight trading sessions


Source: (Briefing.com)

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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