Month: March 2020

The Markets (as of market close March 27, 2020)

Stocks opened the week as they closed the previous one — in a tailspin. However, aggressive moves by the Federal Reserve late in the day, coupled with the hope of a massive aid package from Congress, helped push stocks higher during early trading Tuesday.

News of the passage of massive stimulus legislation (see below) was enough of a positive impetus to send investors back to the markets in droves on Tuesday. The Dow surged to its highest single-day gain since 1933 as it climbed more than 11% by the end of the day. Unfortunately, as debate on the bill continued by the closing bell on Wednesday, the benchmark indexes gave back most of the previous day’s gains. The Dow closed up 2.39%, marking the first back-to-back daily gains since the first week of February.

Passage by the Senate of the coronavirus relief package Wednesday night spurred investor optimism as stocks surged Thursday, despite a record number of unemployment insurance claims primarily due to the COVID-19 virus. By the close of trading, each of the benchmark indexes had posted sizable gains, marking a legitimate bull run. But how long will it last?

Unfortunately, the ride didn’t last as long as hoped as stocks closed last Friday in the red for the day, but significantly higher than they began the week. Following a volatile week of stock prices, the week closed with the Dow recording its best weekly gain since 1938. Ultimately, the passage of the massive coronavirus rescue package, referred to as the CARES Act, gave investors enough encouragement to plunge back into the market. Each of the benchmark indexes listed here posted double-digit weekly gains except for the tech stocks of the Nasdaq, which climbed 9.0% nonetheless. Long-term bond prices also rose, pushing yields lower by the end of the week as 10-year Treasuries yields fell almost 20 basis points.

Oil prices reversed course last week, closing marginally higher at $21.57 per barrel by late Friday afternoon, up from the prior week’s price of $19.84. The price of gold (COMEX) also spiked last week, closing at $1,625.30 by late Friday afternoon, up from the prior week’s price of $1,498.90. The national average retail regular gasoline price was $2.120 per gallon on March 23, 2020, $0.128 lower than the prior week’s price and $0.503 less than a year ago.

Market/Index	2019 Close	Prior Week	As of 3/27	Weekly Change	YTD Change
DJIA	28,538.44	19,173.98	21,636.78	12.84%	-24.18%
Nasdaq	8,972.60	6,879.52	7,502.38	9.05%	-16.39%
S&P 500	3,230.78	2,304.92	2,541.47	10.26%	-21.34%
Russell 2000	1,668.47	1,014.05	1,131.99	11.63%	-32.15%
Global Dow	3,251.24	2,204.75	2,444.77	10.89%	-24.80%
Fed. Funds target rate	1.50%-1.75%	0.00%-0.25%	0.00%-0.25%	0 bps	-150 bps
10-year Treasuries	1.91%	0.93%	0.74%	-19 bps	-117 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• Late last Friday afternoon, President Trump signed the CARES Act, a $2.2 trillion relief package, which is the largest emergency aid package in U.S. history. The legislation provides expanded unemployment benefits including an extra $600 per week, forgivable small business loans, funds to help bail out larger employers hurt by the virus, and cash payments to Americans estimated to reach up to 94% of all tax filers.
• The Federal Reserve called a third emergency meeting last Monday and unveiled a number of aggressive measures in an effort to help the American economy slowed by the coronavirus. In announcing its moves, the Fed warned, “it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.” The Fed’s moves are aimed at calming corporate debt markets and offering direct lending to businesses. The Fed committed to the establishment of a Main Street Business Lending Program, similar to the Small Business Administration, to support small and medium-sized businesses with the availability of direct loans.
• The third and final estimate for the fourth-quarter gross domestic product revealed that the economy grew at an annual rate of 2.1%, the same rate of growth as in the third quarter. In the fourth quarter, imports, private inventory investment, and consumer spending slowed, while government spending increased. Prices for consumer goods and services increased 1.4% in the fourth quarter. Excluding food and energy prices, consumer prices increased 1.3%. Consumer spending rose 1.8% in the fourth quarter, compared to an increase of 3.2% in the third quarter. The gross domestic product increased 2.3% in 2019, compared with an increase of 2.9% in 2018. Prices for consumer goods and services increased 1.4% last year, compared with an increase of 2.1% in 2018.
• In February, personal income increased 0.6% and disposable (after-tax) income increased 0.5%. Consumer spending climbed 0.2%, while consumer prices inched up 0.1%. Prices less food and energy increased 0.2%. Over the past 12 months, consumer prices are up 1.8% as inflationary pressures remain muted.
• Sales of new single-family homes fell 4.4% in February from the previous month. However, sales are 14.3% ahead of their February 2019 estimate. The median sales price of new houses sold in February 2020 was $345,900 ($325,300 in January). The average sales price was $403,800 ($384,000 in January). The estimate of new houses for sale at the end of February was 319,000. This represents a supply of 5.0 months at the current sales rate.
• New orders for manufactured durable goods increased 1.2% in February, marking the fourth increase out of the last five months. A 4.6% increase in transportation equipment drove the February gain. Excluding transportation, durable goods orders decreased 0.6%. Nondefense new orders for capital goods climbed 0.5% last month. Excluding aircraft, new orders for nondefense capital goods dropped 0.8%.
• The trade deficit for goods (excluding services) was $59.9 billion in February, down $6.0 billion from January’s deficit. Exports increased by $0.7 billion while imports fell $5.3 billion.
• For the week ended March 21, there were 3,283,000 claims for unemployment insurance, an increase of 3,001,000 from the previous week’s revised level, which was revised up by 1,000. This marks the highest level of seasonally adjusted initial claims in the history of the seasonally adjusted series. The previous high was 695,000 in October of 1982. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 14. The advance number of those receiving unemployment insurance benefits during the week ended March 14 was 1,803,000, an increase of 101,000 from the prior week’s level, which was revised up by 1,000. This is the highest level for insured unemployment since April 14, 2018, when it was 1,824,000.

Eye on the Week Ahead

We are about to get more accurate information on the impact of the coronavirus on the economy with this week’s economic reports on employment and manufacturing. We may also begin to see whether the recently passed support legislation affects the stock market.

The Markets (as of market close March 20, 2020)

Following the Fed’s latest interest rate cut last weekend, stocks opened markedly lower on Monday, prompting the third circuit breaker in the last six sessions as trading was halted only seconds after the opening bell. By midmorning on Monday, the Dow had lost 8.5%, the S&P 500 slid 7.7%, and the Nasdaq fell 7.8%. By the end of the day, the Dow posted its worst percentage decline since 1987, the S&P 500 fell 12.0%, and the Nasdaq was off 12.3%. Business disruptions, store closures, and travel restrictions continue to drive the massive sell-off.

A late rally Tuesday pushed the major indexes higher, but the momentum was short-lived. Wednesday’s futures triggered yet another circuit breaker. The stock market is now firmly in bear territory — more than 20% off its 52-week high. Despite new measures by the Federal Reserve and the European Central Bank late Wednesday, stocks continued to fall.

After Thursday’s passage of legislation intended to provide some relief to those who are unable to work, coupled with an extension to file income taxes until July, stocks rebounded, somewhat. While Thursday’s gains provided a brief respite from the constant sell-offs, stock values remain depressed. The Dow was down more than 32% from its February 12 high, while the other major indexes have all fallen more than 20%.

By the end of the week, each of the benchmark indexes fell by more than 10%, led by the large caps of the Dow and the small caps of the Russell 2000. The federal government closed U.S. borders with Mexico and Canada to nonessential travel. States like New York, California, and Illinois ordered their respective workforces to stay home. Investors saw these moves as more reason to fear that the worst is yet to come from the COVID-19 pandemic, prompting more stock sell-offs.

Year-to-date, the Russell 2000 is nearly 40% below its 2019 closing value. The Dow and Global Dow are each more than 32% off last year’s pace. The tech-heavy Nasdaq has given up more than 23% from last year, which was a stellar one for this index.

Oil prices continued to plunge last week, closing at $19.84 per barrel by late Friday afternoon, down from the prior week’s price of $33.34. The price of gold (COMEX) also fell last week, closing at $1,498.90 by late Friday afternoon, down from the prior week’s price of $1,532.80. The national average retail regular gasoline price was $2.248 per gallon on March 16, 2020, $0.127 lower than the prior week’s price and $0.300 less than a year ago.

Market/Index	2019 Close	Prior Week	As of 3/20	Weekly Change	YTD Change
DJIA	28,538.44	23,185.62	19,173.98	-17.30%	-32.81%
Nasdaq	8,972.60	7,874.88	6,879.52	-12.64%	-23.33%
S&P 500	3,230.78	2,711.02	2,304.92	-14.98%	-28.66%
Russell 2000	1,668.47	1,210.13	1,014.05	-16.20%	-39.22%
Global Dow	3,251.24	2,470.43	2,204.75	-10.75%	-32.19%
Fed. Funds target rate	1.50%-1.75%	1.00%-1.25%	0.00%-0.25%	-100 bps	-150 bps
10-year Treasuries	1.91%	0.95%	0.93%	-2 bps	-98 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• The Federal Open Market Committee accelerated its meeting time to last weekend, holding an emergency session on Sunday, March 15. Following that meeting, the Committee decided to lower the target range for the federal funds rate to 0.00%-0.25%. This target range is expected to be maintained until the Committee is confident that the economy has weathered the economic storm caused by the coronavirus. The FOMC also indicated that it will continue to monitor information for the economic outlook, public health, and global developments and will “use its tools and act as appropriate to support the economy.” The Committee also indicated its intention to increase its holdings of Treasury securities by at least $500 billion and its holding of agency mortgage-backed securities by at least $200 billion, in an attempt to enhance the flow of credit to households and businesses.
• Not unexpectedly, retail sales fell in February, according to the latest report from the Census Bureau. Sales from retail and food services dropped 0.5% last month but remain 4.3% higher than sales from February 2019. Retail trade sales (manufactured goods resold to the general public) also fell 0.5% in February. Businesses suffering notable losses include electronics and appliance stores (-1.4%), building material and garden equipment and supplies dealers (-1.3%), gasoline stations (-2.8%), and food services and drinking places (-0.5%). Nostore (internet) retail sales increased 0.7% in February and are up 7.5% over the last 12 months ended in February.
• Housing construction slowed in February as issued building permits (-5.5%), housing starts (-1.5%), and housing completions (-0.2%) each decreased from their respective January totals. Dwindling multifamily home construction pulled these totals down last month. Single-family building permits, housing starts, and home completions were all up last month.
• Sales of existing homes rose significantly in February, climbing 6.5% from January. Overall, sales are up 7.2% year-over-year. The median existing-home price for all housing types in February was $270,100, 1.4% ahead of January’s $266,300 median sales price. Total housing inventory sits at a 3.1-month supply. According to the National Association of Realtors®, February’s encouraging sales pace is not reflective of the current impact of the coronavirus on the stock market and economy. Single-family home sales advanced 7.3% in February over the previous month. The median existing single-family home price was $272,400 in February, up 8.1% from February 2019.
• According to the Federal Reserve, industrial production rose 0.6% in February after falling 0.5% in January. Manufacturing output edged up 0.1% in February, but it was still 0.4% below its level of a year earlier. Factory output was unchanged. The index for consumer goods rose 1.7% in February, as automotive products and energy products posted sizable gains. The index for mining declined 1.5%, but the index for utilities jumped 7.1%, as temperatures returned to more typical levels following an unseasonably warm January.
• The number of job openings rose by 411,000 in January and the job openings rate increased to 4.4%, according to the latest Job Openings and Labor Turnover report. Job openings increased in finance and insurance (+65,000), federal government (+38,000), and mining and logging (+8,000). In January, the number of total hires fell by about 100,000, as did the number of total separations.
• For the week ended March 14, there were 281,000 claims for unemployment insurance, an increase of 70,000 from the previous week’s level. This is the highest level for initial claims since September 2, 2017, when it was 299,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 7. The advance number of those receiving unemployment insurance benefits during the week ended March 7 was 1,701,000, an increase of 2,000 from the prior week’s level, which was revised down by 23,000.

Eye on the Week Ahead

This week is likely to see more government action to help ease the economic pain caused by the coronavirus. Economic reports such as durable goods orders, the gross domestic product, and personal income and outlays are for February and are not likely to reflect the full impact of the COVID-19 virus.

The Markets (as of market close March 13, 2020)

While the hope may have been that it couldn’t get worse, unfortunately, it has. The coronavirus has not only posed a significant health threat to millions of people worldwide, but its impact has been felt economically and in the stock markets, both here and globally. Last Wednesday, the World Health Organization officially designated the coronavirus outbreak a pandemic, having reached more than 100 countries and more than 100,000 reported individual cases. President Trump announced that he intended to suspend travel from certain areas of Europe to the United States for the next 30 days. He also proposed plans for $50 billion in low-interest loans to affected businesses and delaying the April 15 tax-filing deadline. And Congress approved about $8 billion in funding to develop virus treatments and provide financial help to states.

Stock markets reacted negatively to that news, plunging dramatically on Thursday. Not unexpectedly, some individual stocks were hit hardest, including airline and transportation stocks, retail and eatery shares, and energy stocks. The markets recouped some losses midday Thursday following the Federal Reserve’s announced intention to infuse more than $1.5 trillion into short-term funding markets. But the spurt was short-lived as stocks suffered their worst single-day drop since 1987’s Black Monday. Globally, stocks fared no better. STOXX Europe, Japan’s Nikkei 225, and China’s Shanghai Composite Index all suffered losses.

The sell-off continued into Friday, which looked poised to reach bear levels across most indexes. A late rally pushed stocks higher following the president’s declaration of a national emergency last Friday afternoon. Whether this surge will carry over to next week remains to be seen. Nevertheless, each of the benchmark indexes closed last week in the red, led by the small caps of the Russell 2000 and the Global Dow. The Dow fell over 10% despite gaining almost 2,000 points late Friday. The Nasdaq and S&P 500 each managed to keep losses in single digits.

Oil prices continued to plunge last week, closing at $33.34 per barrel by late Friday afternoon, down from the prior week’s price of $41.56. The price of gold (COMEX) also fell last week, closing at $1,532.80 by late Friday afternoon, down from the prior week’s price of $1,674.30. The national average retail regular gasoline price was $2.375 per gallon on March 9, 2020, $0.048 lower than the prior week’s price and $0.096 less than a year ago.

Market/Index	2019 Close	Prior Week	As of 3/13	Weekly Change	YTD Change
DJIA	28,538.44	25,864.78	23,185.62	-10.36%	-18.76%
Nasdaq	8,972.60	8,575.62	7,874.88	-8.17%	-12.23%
S&P 500	3,230.78	2,972.37	2,711.02	-8.79%	-16.09%
Russell 2000	1,668.47	1,449.22	1,210.13	-16.50%	-27.47%
Global Dow	3,251.24	2,883.29	2,470.43	-14.32%	-24.02%
Fed. Funds target rate	1.50%-1.75%	1.00%-1.25%	1.00%-1.25%	-50 bps	-50 bps
10-year Treasuries	1.91%	0.70%	0.95%	25 bps	-96 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• The federal budget continued to expand in February. The deficit was $235.3 billion last month following January’s deficit of $32.6 billion. Last February, the deficit was $234.0 billion. Year-to-date, the deficit sits at $624.5 billion, $80.1 billion greater than the deficit over the same period last year. The largest source of revenue, individual income taxes, is $44.6 billion ahead of income taxes over the comparable period last year. Social Security continues to be the biggest expenditure, at $448.0 billion for this fiscal year, followed by national defense and Medicare, each of which has cost roughly $305.0 billion.
• Consumer prices rose 0.1% in February, the same bump as in January. Over the last 12 months ended in February, consumer prices are up 2.3%. Despite energy prices falling 2.0%, increases in food and shelter prices were enough to push overall consumer prices slightly higher.
• Producers saw their prices fall 0.6% in February after climbing 0.5% the previous month. Over the past 12 months ended in February, producer prices for goods and services have increased 1.3%. Prices for goods fell 0.9% in February, the largest decline since moving down 1.1% in September 2015. Over 60% of the broad-based February decrease can be traced to prices for energy, which dropped 3.6%. More specifically, gas prices fell 6.5% last month. Prices for services dropped 0.3% in February, the largest decline since last September. In February, over 70% of the decrease in prices for services can be traced to margins for trade services, which dropped 0.7%. (Trade indexes measure changes in margins received by wholesalers and retailers.)
• Prices for imports fell 0.5% in February after ticking up 0.1% the previous month. The decline in import prices was the largest decrease since a similar plunge last August. Since February 2019, import prices have fallen 1.2%. Import fuel prices decreased 7.7% in February, the largest monthly decline since the index dropped 7.8% in June 2019. Excluding fuel, import prices increased 0.3% in February. Export prices dropped 1.1% last month following a 0.6% increase in January. This marks the largest decrease in export prices since December 2015. Prices for exports declined 1.3% on a 12-month basis in February, after rising 0.4% from January 2019 to January 2020. Prices for agricultural exports declined 2.7% in February while nonagricultural export prices decreased 1.0%, pulled down by a drop in prices for industrial supplies and materials.
• For the week ended March 7, there were 211,000 claims for unemployment insurance, a decrease of 4,000 from the previous week’s level, which was revised down by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended February 29. The advance number of those receiving unemployment insurance benefits during the week ended February 29 was 1,722,000, a decrease of 11,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

Although the Federal Open Market Committee was scheduled to meet later this week, the Committee gathered in an emergency session this past weekend and cut the federal funds rate to a range of 0.00%-0.25% — a 100 basis point slash, which, along with other moves, is intended to stabilize markets and the economy. The rate cut follows the House of Representatives passing of legislation that would make testing for the virus free and provide paid sick leave to certain workers.

The Markets (as of market close March 6, 2020)

While it apparently took a day to take effect, the Fed’s decision to reduce the target range for the federal funds rate by 50 basis points quelled the massive rush to sell stocks and brought some investors back to the market. Following losses earlier in the week, the benchmark indexes surged with the Dow gaining more than 700 points last Wednesday. Unfortunately, the wild ride continued into Thursday with stocks losing most of the prior day’s gains. A final rally just before the close of the market on Friday was enough to push a few of the benchmark indexes listed here moderately higher. The Dow, S&P 500, and Nasdaq were the only indexes to post gains over their respective prior week’s closing values. The Russell 2000 and Global Dow couldn’t rally enough to finish in the black.

Money poured from stocks to long-term bonds, pushing prices higher and sending yields plummeting. The yield on 10-year Treasuries dropped below 1.0% for the first time ever last Tuesday, only to continue to fall to record lows each day thereafter until reaching 0.70% by the close of trading on Friday.

Oil prices fell to their lowest point in many years last week, closing at $41.56 per barrel by late Friday afternoon, down from the prior week’s price of $45.19. Russia’s apparent refusal to cut production greatly contributed to the drop in oil prices. The price of gold (COMEX) shot higher last week, closing at $1,674.30 by late Friday afternoon, up from the prior week’s price of $1,585.80. The national average retail regular gasoline price was $2.423 per gallon on March 2, 2020, $0.043 lower than the prior week’s price but $0.001 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 3/6	Weekly Change	YTD Change
DJIA	28,538.44	25,409.36	25,864.78	1.79%	-9.37%
Nasdaq	8,972.60	8,567.37	8,575.62	0.10%	-4.42%
S&P 500	3,230.78	2,954.22	2,972.37	0.61%	-8.00%
Russell 2000	1,668.47	1,476.43	1,449.22	-1.84%	-13.14%
Global Dow	3,251.24	2,900.01	2,883.29	-0.58%	-11.32%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.00%-1.25%	-50 bps	-50 bps
10-year Treasuries	1.91%	1.12%	0.70%	-42 bps	-121 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• The Federal Reserve cut interest rates by half a percent last Tuesday in an emergency move. In making the adjustment, the Federal Open Market Committee indicated that while the economy remains strong, the coronavirus poses evolving risks to economic activity. The Committee indicated that it is closely monitoring developments and will consider further actions to support the economy. The Committee is not scheduled to meet until March 17. This emergency meeting and resulting rate cut are the first such actions since the financial crisis of 2008.
• Employment rose by a whopping 273,000 in February, with notable job gains occurring in health care and social assistance, food services and drinking places, government, construction, professional and technical services, and financial activities. The unemployment rate fell 0.1 percentage point to 3.5%. That rate has been either 3.6% or 3.5% since last October. The number of unemployed marginally decreased by 105,000 to 5.787 million. The employment participation rate remained at 63.4%. The employment-population ratio fell 0.1 percentage point to 61.1%. In February, average hourly earnings increased by $0.09 to $28.52. Over the past 12 months, average hourly earnings have increased by 3.0%. The average workweek rose by 0.1 hour to 34.4 hours in February.
• The goods and services trade deficit was $45.3 billion in January, down $3.3 billion from December’s revised figure. January exports were $208.6 billion, $0.9 billion less than December exports. January imports were $253.9 billion, $4.2 billion less than December imports. Of note, the goods trade deficit with Canada decreased $3.7 billion to $0.7 billion, the deficit with China shrunk $2.1 billion to $23.7 billion, and the deficit with Japan dropped $0.9 billion to $5.3 billion.
• According to the Manufacturing ISM® Report On Business®, manufacturing slowed in February. The purchasing managers’ index dropped 0.8 percentage point to 50.1% (a reading over 50% indicates growth, but at a slower rate) last month. New orders declined 2.2%, production fell 4 percentage points, new export orders decreased 2.1 percentage points, imports plummeted 8.7 percentage points, and inventories and prices receded 2.3 percentage points and 7.4 percentage points, respectively. On the other hand, backlog of orders rose 4.6 percentage points, employment marginally increased by 0.3 percentage point, and deliveries ramped up 4.4 percentage points.
• While not always the case, the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ mirrored the ISM® survey with its purchasing managers’ index falling to 50.7 in February, down from January’s 51.9. According to the report, the health of the manufacturing sector was the weakest since last August.
• Although manufacturing slowed in February the services industry picked up steam, according to the Non-Manufacturing ISM® Report On Business®. The non-manufacturing index increased 1.8 percentage points in February, with new orders (+6.9 percentage points) driving the improvement. Employment increased 2.5 percentage points while prices and business activity fell 4.7 percentage points and 3.1 percentage points, respectively.
• For the week ended February 29, there were 216,000 claims for unemployment insurance, a decrease of 3,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended February 22. The advance number of those receiving unemployment insurance benefits during the week ended February 22 was 1,729,000, an increase of 7,000 from the prior week’s level, which was revised down by 2,000.

Eye on the Week Ahead

As the stock market continues to reel from the coronavirus, economic indicators bear watching as February’s information should begin to reflect the impact of the virus on the economy. Both consumer prices and producer prices are not expected to change much from their January totals, which edged marginally higher. Import and export prices in February could begin to show the effects of trade with China and other countries influenced by the virus.

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The Markets (as of market close February 28, 2020)

With a growing number of countries reporting new cases of the coronavirus, the obvious spread of this dreaded virus prompted a massive panic sell-off, the likes of which haven’t been seen since 2008. Investors’ fears of widespread economic tumult caused by the coronavirus were too much to ignore, despite last Friday’s statement from Fed chairman Jerome Powell that the central bank was prepared to cut rates if necessary when it meets in March. Crude oil prices fell by over $6 per barrel since the end of January. The 10-year Treasury note fell to a record low as money flowed into long-term bonds, pushing prices higher and yields lower.

By the close of trading on the last day of February, each of the benchmark indexes listed here sustained major losses, led by the Dow, which fell by more than 10.0%. The small-cap Russell 2000 dropped more than 8.50% for the month, followed by the S&P 500, the Global Dow, and the tech stocks of the Nasdaq. Year-to-date gains achieved in January and the first part of February were wiped out, with three of the benchmark indexes listed here trailing their 2019 closing values by double digits. The Russell 2000 fell by nearly 12.0%, followed by the Dow and the Global Dow, which lost close to 11.0%, respectively.

By the close of trading on February 28, the price of crude oil (WTI) was $45.19 per barrel, well below the January 31 price of $51.61 per barrel. The national average retail regular gasoline price was $2.466 per gallon on February 24, down from the January 27 selling price of $2.506 but $0.076 more than a year ago. The price of gold finished February at $1,585.80, slightly lower than its January closing value of $1,592.70.

Market/Index	2019 Close	Prior Month	As of February 28	Month Change	YTD Change
DJIA	28,538.44	28,256.03	25,409.36	-10.07%	-10.96%
Nasdaq	8,972.60	9,150.94	8,567.37	-6.38%	-4.52%
S&P 500	3,230.78	3,225.52	2,954.22	-8.41%	-8.56%
Russell 2000	1,668.47	1,614.06	1,476.43	-8.53%	-11.51%
Global Dow	3,251.24	3,161.86	2,900.01	-8.28%	-10.80%
Fed. Funds	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.52%	1.12%	-40 bps	-79 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Latest Economic Reports

• Employment: There were 225,000 new jobs added in January after gaining 145,000 in December. Notable job gains in January occurred in construction, transportation, and health care. The unemployment rate inched up 0.01 percentage point to 3.6% for the month as the number of unemployed persons rose by 140,000 to 5.9 million. In December, average hourly earnings for all employees rose by $0.07 to $28.44. Average hourly earnings increased by 3.1% over the last 12 months ended in January. The average workweek was unchanged at 34.3 hours in January. The labor participation rate for January was 63.4% (63.2% in December), while the employment-population ratio was 61.2% last month (61.0% in December).
• FOMC/interest rates: The Federal Open Market Committee did not meet in February. The next time the Committee meets is mid-March. Following its latest meeting in January, the FOMC decided to maintain the target range for the federal funds rate at 1.50%-1.75%. The rate hasn’t changed since it was decreased last October.
• GDP/budget: According to the second estimate for the fourth-quarter gross domestic product, the economy accelerated at an annualized rate of 2.1%, the same rate as in the third quarter. Consumer spending grew at a rate of 1.7% (3.2% in the third quarter), fixed investment fell 0.5% in the fourth quarter (-0.8% in the third quarter), and nonresidential fixed investment dropped 2.3% in the fourth quarter, the same rate as in the prior quarter. Consumer prices advanced at a rate of 1.3% in the fourth quarter, comparable to the third quarter (1.5%). The Treasury budget posted a deficit of $32.6 billion in January ($13.3 billion in December). Last January saw a budget surplus of $8.7 billion. Through the first four months of the 2020 fiscal year, the deficit sits at $389.2 billion, 25.4% greater than the deficit over the same period last fiscal year. Compared to the same period last year, government spending climbed 10.3%, far exceeding receipts, which rose 6.1%. Medicare expenditures jumped 23.3%, national defense outlays advanced 8.9%, and Social Security expenditures climbed 5.6%. On the income side of the ledger, income tax receipts are up 5.5% compared to the same four months last year, followed by employment and general retirement, which rose 5.7%.
• Inflation/consumer spending: According to the Personal Income and Outlays report for January, both pre- and post-tax personal income rose 0.6% for the month. Consumer spending also climbed 0.2% over December’s totals. Price inflation remained low, however, inching ahead 0.1% in January and 1.7% over the last 12 months. Consumer prices less food and energy also advanced 0.1% for the month and 1.6% since January 2018.
• The Consumer Price Index inched ahead 0.1% in January following a 0.2% bump in December. Year to date, consumer prices are up 2.5%. Increases in prices for shelter (which makes up the largest portion of overall consumer costs) climbed 0.3% in January. Energy prices, which increased 1.4% in December, receded 0.7% in January, reflecting a drop in gas prices.
• Prices producers receive for goods and services advanced 0.5% in January after edging up 0.2% in December. The index has increased 2.1% since last January. Producer prices less foods, energy, and trade services rose 0.5% in January (0.2% in December). Since January 2019, prices less foods, energy, and trade services moved up 1.7%. A drop in energy prices was more than offset by an advance in services.
• Housing: After climbing 3.6% in December, existing home sales fell 1.3% in January. Year over year, existing home sales are up 9.6% (10.8% for the 12 months ended in December). The median sales price for existing homes was $266,300 in January compared to $274,500 in December. Existing home prices were up 6.8% from January 2019. Total housing inventory at the end of January was 1.42 million, an increase from the December rate of 1.40 million units for sale. Sales of new single-family homes spiked in January, climbing 7.9% over December’s totals. Sales are 18.6% above the January 2019 estimate. The median sales price of new houses sold in January was $348,200 ($324,100 in December). The average sales price was $402,300 in January ($373,300 in December). Available inventory, at a 5.1-month supply, was slightly lower than December’s 5.5-month supply.
• Manufacturing: For the second consecutive month, industrial production declined, dropping 0.3% in January after falling 0.4% the prior month. Unseasonably warm weather held down the output of utilities and a major manufacturer significantly slowed production of civilian aircraft, both of which were prime factors in pushing industrial production downward. The index for manufacturing edged down 0.1% in January; excluding the production of aircraft and parts, factory output advanced 0.3%. The index for mining rose 1.2%. Following a spike in December, new orders for durable goods dropped 0.2% in January, declining for the second time over the last three months. For the year, new orders for durable goods are down 2.3%. Transportation equipment, down four of the last five months, drove the decrease, falling 2.2% in January. However, excluding transportation, new orders rose 0.9%. New orders for capital goods (manufactured assets used by businesses to produce consumer goods) jumped ahead 12.4% in January following a 6.2% tumble in December.
• Imports and exports: Import prices were unchanged in January after increasing 0.3% in December. In January, falling fuel prices offset increasing prices for nonfuel imports. Import prices advanced on a 12-month basis for the second consecutive month after not recording an over-the-year increase since the 12-month period ended in March 2019. Prices for import fuel declined 2.2% last month, marking the largest drop since fuel prices fell 4.2% in August. Excluding fuel, import prices rose 0.2% in January but are down 0.9% over the past year. Prices for exports advanced 0.7% in January, the largest monthly advance since export prices increased 0.7% in March. Prices for exports also advanced on a 12-month basis, increasing 0.5% in January. The rise in January was the first 12-month advance since export prices increased 0.2% for the year ended in April.
• The international trade in goods deficit was $65.5 billion in January, down from the $68.7 billion in December. Exports of goods for January fell 1.0% to $135.7 billion, $1.4 billion less than December exports. Imports of goods dropped 2.2% to $201.2 billion, $4.6 billion less than December imports.
• The latest information on international trade in goods and services, out February 5, is for December and shows that the goods and services trade deficit widened from $43.7 billion in November to $48.9 billion. December exports were $209.6 billion, $1.6 billion more than November exports. December imports were $258.5 billion, $6.8 billion more than November imports. The December increase in the goods and services deficit reflected an increase in the goods deficit of $5.1 billion and a decrease in the services surplus of $0.1 billion. For 2019, the goods and services deficit decreased $10.9 billion, or 1.7%, from 2018. Exports decreased $1.5 billion, or 0.1%. Imports decreased $12.5 billion, or 0.4%.
• International markets: Growing concerns over the spread of the coronavirus have rattled investors at home and abroad. European stock markets plunged on fears of negative economic impacts. Europe has seen outbreaks of the illness in Italy, Germany, France, Spain, and Great Britain. South Korea and Iran experienced a growing number of cases. Benchmark indexes such as the STOXX Europe 600, FTSE 100, and the DAX Performance Index (Germany’s benchmark index) have fallen noticeably since the end of January. Purchasing managers from several countries’ industries are warning of a slowdown in manufacturing. Japan’s gross domestic product showed that the economy contracted in the fourth quarter of 2019, with declines in consumer spending and investment. China’s GDP expanded at a rate of 6.0% in the fourth quarter and 6.1% for 2019 — the lowest figures in 29 years.
• Consumer confidence: The Conference Board Consumer Confidence Index® increased slightly in February following a moderate increase in January. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — decreased last month. However, the Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, increased in February.

Eye on the Month Ahead

The impact of the coronavirus has been reflected in some economic reports and definitely in the stock market. March marks the first meeting of the Federal Open Market Committee since the end of January. Interest rates were unchanged at that time,. However, the Fed has stated a willingness to cut rates if necessary due to the economic tumult caused by the coronavirus.

The Markets (as of market close February 28, 2020)

Panicked investors continued a major sell-off last week, pushing stocks to double-digit losses. Fears of a major global economic impact increased as the coronavirus continued to spread across multiple countries. By the end of last week, each of the major benchmark indexes listed here fell by more than 10%, headed by the Dow, which lost close to 12.5%. Following the Dow were the small caps of the Russell 2000, the S&P 500, the Nasdaq, and the Global Dow. Money flowed from stocks and into long-term bonds. The yield on 10-year Treasuries plummeted 35 basis points to 1.12% as bond prices soared. The price of oil was also hit hard, falling more than $8 per barrel by the end of last week.

Oil prices plunged last week, closing at $45.19 per barrel by late Friday afternoon, down from the prior week’s price of $53.35. The price of gold (COMEX) fell back last week, closing at $1,585.80 by late Friday afternoon, down from the prior week’s price of $1,646.10. The national average retail regular gasoline price was $2.466 per gallon on February 24, 2020, $0.038 higher than the prior week’s price and $0.076 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 2/28	Weekly Change	YTD Change
DJIA	28,538.44	28,992.41	25,409.36	-12.36%	-10.96%
Nasdaq	8,972.60	9,576.59	8,567.37	-10.54%	-4.52%
S&P 500	3,230.78	3,337.75	2,954.22	-11.49%	-8.56%
Russell 2000	1,668.47	1,678.61	1,476.43	-12.04%	-11.51%
Global Dow	3,251.24	3,238.97	2,900.01	-10.47%	-10.80%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.47%	1.12%	-35 bps	-79 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• There was no change in the growth of the economy in the fourth quarter as the second estimate mirrored the first, with the economy expanding at an annual rate of 2.1%. The third-quarter GDP also advanced 2.1%. The price index for gross domestic purchases increased 1.4% in the fourth quarter, the same increase as in the third quarter. The personal consumption price index increased 1.3%, compared with a third-quarter increase of 1.5%. Excluding food and energy prices, the PCE price index increased 1.2%, compared with an increase of 2.1% in the prior quarter.
• Inflationary pressures remained muted in January as prices for consumer goods and services inched up 0.1%. Over the last 12 months, the personal consumption price index is up 1.7%, well below the Fed’s target of 2.0%. Prices less food and energy also rose 0.1% in January and 1.6% for the year. Personal income advanced 0.6% in January (after-tax personal income also advanced 0.6%) and consumer spending climbed 0.2% for the month.
• Manufacturing continues to slide, down two of the last three months. New orders for durable goods fell 0.2% in January and are- rf down 2.2% over the last 12 months. Excluding transportation, new orders increased 0.9%. Excluding defense, new orders increased 3.6%. Transportation equipment, down four of the last five months, drove the decrease, falling 2.2%. Shipments of manufactured durable goods in January, down seven consecutive months, decreased 0.2%. On the plus side of this latest report, new orders for nondefense capital goods in January increased 12.4%. Capital goods are tangible assets produced by one manufacturer and used by another manufacturer or business to produce consumer goods.
• While sales of existing homes may have fallen in January, the same didn’t hold true for new home sales. According to the Census Bureau, sales of new single-family homes were 7.9% above the December rate and 18.6% higher than January 2019. The median sales price of new houses sold in January 2020 was $348,200, and the average sales price was $402,300 — both of which were higher than December’s respective sales prices. The estimate of new houses for sale at the end of January was 324,000, which represents a supply of 5.1 months at the current sales rate.
• The international trade in goods deficit was a little smaller in January compared to the prior month. At $65.5 billion, the deficit was $3.2 billion below December’s deficit figure. Exports were $1.4 billion less than December’s exports. Imports were $4.6 billion less than December’s imports.
• For the week ended February 22, there were 219,000 claims for unemployment insurance, an increase of 8,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended February 15. The advance number of those receiving unemployment insurance benefits during the week ended February 15 was 1,724,000, a decrease of 9,000 from the prior week’s level, which was revised up by 7,000.

Eye on the Week Ahead

Reports on the manufacturing sector kick off the week. Purchasing managers reported some growth in new orders and production in January, but manufacturing has been generally weak for quite some time. On the other hand, employment has been solid with 225,000 new jobs added in January. It will be hard to top that total in February. Average weekly wages grew 3.1% over the 12 months ended in January. Investors will no doubt be watching the coronavirus to see if it continues to spread and its effect on global supply chains.

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