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Corporate earnings driving the market higher

by Fortem Financial February 10, 2020

Last week, corporate earnings, and China’s announcement of a 50% tariff reduction on some U.S. products, provided momentum amidst coronavirus uncertainties. The Nasdaq (4.04%) led the major indices for the week followed by the S&P 500® Index (3.17%), the Dow Jones Industrial Average (3.00%) and the Russell 2000® Index (2.65%). The January employment report, 225,000 jobs added, far exceeded expectations of 161,500. Wage growth remains modest: 0.2% for the month for a 3.1% (+0.1%) annual increase. Unemployment rose 0.1% to 3.6% as more individuals entered the workforce; the labor force participation rate rose 0.2% to 63.2%, its highest level since June of 2013.

The coronavirus outbreak has created global economic uncertainty. Several prospects for treatment (as reported by a University in China), and a vaccine (as reported by scientists in the United Kingdom) may offer some promise to curb the virus’ spread. China reports declines in manufacturing, exports, imports and demand for oil; China may well experience a decline in GDP this year. The U.S. economy continues to perform well: both the January ISM manufacturing and non-manufacturing Indices exceeded expectations. Elsewhere, however, other countries including Germany, France, Taiwan and Japan reported unexpected declines in industrial production, household spending or exports.

About two thirds of the companies in the S&P 500® have reported earnings; the results continue the recent pattern of exceeding modest expectations. The market rewarded a diverse mix of companies including Allegheny Technologies, Cerner, Coty, Cardinal Health and Ralph Lauren which exceeded expectations for revenue and earnings growth. Corporate commentaries are generally upbeat although tempered by the two uncertainties: the consequences of the coronavirus, and the potential opportunities created by the U.S. China trade agreement. On Thursday, China announced that, as of February 14th, it would halve the existing tariffs on $75 billion in U.S. goods. On Friday, President Trump reported that he and President Xi spoke by phone; President XI reaffirmed China’s purchase commitments in the phase one agreement.

The market narrative will likely continue as the markets respond to the latest news on earnings and the coronavirus. Not surprisingly, the coronavirus scare is attracting investors to U.S. Treasuries; yields on the benchmark 10-year have fallen more than 40 basis points this year. Volatility will continue to be a factor; overall investor sentiment, though, should remain positive barring any new coronavirus developments.

Source: Pacific Global Investment Management Company

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.

Sincerely,

Fortem Financial
760-206-8500
team@fortemfin.com

 

 

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Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

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Five Star Professional Disclosure:
The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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