In this week’s recap: U.S. stocks finish higher after a wild trading week; the Federal Reserve cuts short-term interest rates; Treasury yields decline; the latest jobs report out of Washington shows no falloff for hiring.
THE WEEK ON WALL STREET
Heightened coronavirus fears, falling yields, and Super Tuesday primary results sent stocks on a rollercoaster ride of sharp price swings, leaving stocks marginally higher for the week.
The Dow Jones Industrial Average improved 1.79%; the S&P 500, 0.61%; the Nasdaq Composite, 0.10%. Outside the U.S., developed equity markets tracked by the MSCI EAFE Index rose 2.60%.1,2
A Swift Fed Decision
Wednesday morning, the Federal Reserve lowered its short-term interest rate by 0.5% to a range of 1.00%-1.25%, making its biggest cut since 2008. Addressing the media, Fed Chairman Jerome Powell said that the move was made to give the economy a “meaningful” lift and “help boost household and business confidence.”
The question is whether reducing borrowing costs can effectively address growing business and consumer anxieties about shopping, traveling, and gathering.3
A Push Toward Treasuries
The uncertainty on Wall Street has heightened demand for Treasury bonds. Their yields typically fall as their prices rise, and fall they did last week. The yield on the 10-year Treasury dipped under 0.70% during Friday’s market day, an all-time low.4
Winter Hiring Surge Continues
The Department of Labor’s latest employment report showed companies adding 273,000 net new hires last month. Net monthly payroll growth has averaged 243,000 since December.5
The Fed’s 50-basis-points cut in the federal funds rate has now shifted the sights of investors toward the European Central Bank, which is expected to make a policy announcement on March 12. The ECB has less room to maneuver than the Fed, since its key interest rate currently stands at -0.5%. Negative interest rates have done little to lift eurozone economies, which may necessitate more-creative monetary policy accommodation from the ECB’s new president, Christine Lagarde.
Traders are also focused on whether the Federal Reserve will make another rate cut on March 18, when its next meeting concludes. The half-point rate cut this past week did little to soothe stock market concerns; opinions vary about what the central bank might choose to do next.6
TIP OF THE WEEK
If you owe money on the vehicle you drive and would be hard-pressed to replace it in the case of a bad accident, make sure that you have an auto insurance policy with comprehensive and collision coverage.
THE WEEK AHEAD: KEY ECONOMIC DATA
Wednesday: The Census Bureau publishes a new Consumer Price Index, showing monthly and yearly inflation.
Friday: The University of Michigan presents its initial Consumer Sentiment Index for March, measuring consumer confidence.
Source: MarketWatch, March 6, 2020
The MarketWatch economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Monday: Thor Industries (THO)
Tuesday: Dick’s Sporting Goods (DKS)
Thursday: Adobe (ADBE), Broadcom (AVGO), Dollar General (DG), Oracle (ORCL), Ulta Beauty (ULTA)
Source: Zacks.com, March 6, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
QUOTE OF THE WEEK
“You can get everything in life you want if you will just help enough other people get what they want.” – ZIG ZIGLAR
THE WEEKLY RIDDLE
A man says that where he lives, 1,500 plus 20 and 1,600 minus 40 equal the same thing, and his neighbors and coworkers all agree. Where is he living?
LAST WEEK’S RIDDLE:
You see us regularly, but never at the same time. We appear everywhere but never in the same place. What are we?
Day and night.
Greg R. Solis, AIF®
President and CEO
Bob Medler, CRPC®, CMFC®, AIF®
Wealth Advisor / Investment Analyst
Tiffany Valentine, CFP®
CERTIFIED FINANCIAL PLANNER™
Vice President | Director of Financial Planning
78-075 Main Street
La Quinta, CA 92253
Office: (760) 771-3339
Fax: (760) 771-3181
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
1 – wsj.com/market-data [3/6/20]
2 – quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices [3/6/20]
3 – washingtonpost.com/business/2020/03/03/economy-coronavirus-rate-cuts/ [3/3/20]
4 – cnbc.com/2020/03/06/the-plunge-in-bond-yields-is-scary-now-but-could-be-helpful-later.html [3/6/20]
5 – tinyurl.com/u7anpfg [3/6/20]
6 – fxstreet.com/macroeconomics/central-banks/fed [3/6/20]