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Weekly Market Snapshot

January 24, 2020

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

The economic calendar was relatively thin and, for the financial markets, was superseded by concerns about the Wuhan coronavirus. Hundreds of millions of people travel in the extended Lunar New Year holiday. The virus is likely to have a significant negative impact on the Chinese economy and the large amount of travel may further spread the virus.

The Index of Leading Economic Indicators (LEI) fell 0.3% in December, held down partly by a quirk in jobless claims (difficulties in adjusting for the late Thanksgiving appear to have shifted some claims in December; claims have since fallen back in January). Still, beyond the quirk in claims, the underlying trend in the LEI has been lower (down in four of the last five months, -0.7% since July). The shallow rate of decline in the LEI is more consistent with sluggish near-term growth than an outright recession. At -0.23, the three-month average of the Chicago Fed National Activity Index remained consistent with below-trend growth.

Next week, the economic calendar picks up, although financial markets may still be sensitive to news of the Wuhan coronavirus. The Federal Open Market Committee is widely expected to leave short-term interest rates unchanged. Real GDP growth is expected to have risen at a moderate rate in the advance estimate for the fourth quarter. Slower inventory accumulation should subtract from growth, but a narrower trade deficit will add. It’s recommended that investors look beyond the headline figure and focus on the key components, consumer spending and business fixed investment.


Indices

  Last Last Week YTD return %
DJIA 29160.09 29297.64 2.18%
NASDAQ 9402.48 9357.13 4.79%
S&P 500 3325.54 3316.81 2.93%
MSCI EAFE 2036.49 2048.65 -0.02%
Russell 2000 1685.01 1705.22 0.99%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.75 5.50
Fed Funds 1.75 2.40
30-year mortgage 3.63 4.59

Currencies

  Last 1 year ago
Dollars per British Pound 1.312 1.307
Dollars per Euro 1.106 1.130
Japanese Yen per Dollar 109.49 109.64
Canadian Dollars per Dollar 1.313 1.335
Mexican Peso per Dollar 18.767 19.019

Commodities

  Last 1 year ago
Crude Oil 55.59 53.13
Gold 1571.60 1285.90

Bond Rates

  Last 1 month ago
2-year treasury 1.52 1.63
10-year treasury 1.72 1.89
10-year municipal (TEY) 1.95 2.29

Treasury Yield Curve – 01/24/2020

Chart

As of close of business 01/23/2020


S&P Sector Performance (YTD) – 01/24/2020


Chart

As of close of business 01/23/2020


Economic Calendar

January 27  —  New Home sales (December)
January 28  —  Durable Goods (December)
 —  CB Consumer Confidence (January)
January 29  —  Advance Economic Indicators (December)
January 29  —  FOMC Policy Decision
January 30  —  Jobless Claims (week ending January 25)
 —  Real GDP (4Q19, advance estimate)
January 31  —  Personal Income and Spending (December)
 —  Employment Cost Index (4Q19)
 —  Chicago Business Barometer (January)
February 2  —  Super Bowl LIV
February 3  —  ISM Manufacturing Index (January)
 —  Iowa Caucus
February 7  —  Employment Report (January)
February 14  —  Retail Sales (January)
February 17  —  Presidents Day Holiday (markets closed)

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business January 23, 2020.

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