Market Recap for the week ending 2/8/19

Darren Leavitt, CFA

Anxiety over trade and concerns regarding future earnings growth subdued markets last week.  Additionally, the 200-day moving average on the S&P held as a line of resistance and induced some technical selling.  The S&P 500 closed essentially flat for the week up 0.05%; the Nasdaq outperformed gaining 0.47%- its 7th consecutive weekly advance, the Dow increased by 0.17%  and the Russell 2000 lagged, losing -.073% on the week.  Treasuries advanced again last week with the 2-year yield falling 4 basis points to 2.46% and the 10-year yield losing 6 basis points to 2.63%.  Gold and Oil were down slightly for the week, closing at $1314 and $52.76, respectively.  There were no changes to our models last week.

Trade continues to be top of mind for investors.  Last week sentiment reversed to the half-empty kind.  The rhetoric out of Washington suggested that the US and China were still far apart on a number of issues.  Markets also took pause as news suggested that the countries leaders would not be meeting before the March 1st deadline.  The markets also had to contend with renewed concerns on US/EU trade negotiations where it was suggested that very little progress had been made.   Brexit offered very little to the uncertain outlook for trade.  The next few weeks will be crucial for trade and will continue to command much of the market’s attention.  US trade delegates will be headed to Beijing this week to continue talks.

About two-thirds of the S&P 500 have reported 4th quarter earnings so far.  It appears that the results are a bit better than average when you compare the results based on the historical percentage of upside results versus misses.  That said, the current quarter is the worst quarter over the last 5 quarters when you compare the same figures.  Many companies have also used this earnings season to recalibrate expectations for the coming quarter and year, and it appears that this recalibration may result in negative earnings growth for the next quarter.

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