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Market Summary

Fourth quarter corporate earnings season got off to a strong start last week and helped drive U.S. equities higher alongside the signing of the U.S.-China Phase One trade deal and some encouraging global economic data. For the week, the S&P 500 returned 2.0%, while the Dow and Nasdaq Composite gained 1.8% and 2.3%, respectively. Trade sensitive sectors like the technology and materials sectors performed well with gains of 3.0% and 2.7%, but the domestically-oriented, high-dividend paying utilities sector actually notched the best gains for the week at 3.7%, as investors hunt for yield amid low global interest rates.

Several large financial service companies kicked off earnings season on a positive note last week as 11 of the 15 S&P 500 financial companies that reported beat earnings expectations for the quarter. Consumer loan demand and credit quality remained healthy during the quarter, further boosting sentiment that the U.S. consumer remains on solid footing.

The official signing of the Phase One trade deal between the U.S. and China last Wednesday was broadly met with relief by global market participants, though they must now dig into the details of the deal and its implications. China committed to an aggressive $200 billion in additional purchases of U.S. goods and pledged to improve intellectual property protections. For its part, the U.S. rolled back a portion of tariffs and paused on additional tariffs on Chinese imports, though the majority of tariffs will remain in place until completion of a more comprehensive Phase Two trade pact. China’s GDP growth has fallen to its slowest pace since 1990 amid the trade tensions and slowing global growth.

The week ahead will be light on new economic data, but investors will focus in on corporate earnings announcements as another 57 companies of the S&P 500 (about 11%) are on the docket to report earnings.

Economic Highlights:

  • Inflation: Both the Consumer Price Index (CPI) and Producer Price Index (PPI) came in below expectations last week with annual growth rates of 2.3% and 1.3%, respectively. U.S. bond yields dipped lower on the reports due to falling future inflation expectations.
  • Retail Sales: Monthly retail sales growth met expectations in December rising 0.3% over November. Consumer sentiment also remained high with the University of Michigan Consumer Sentiment index coming in at 99.1, though slightly lower than the prior month reading of 99.3.

US Economy – The Week Ahead

Tuesday, 1/21/2020

  • No Data

Wednesday, 1/22/2020

  • Existing Home Sales – Consensus Estimate: 5,450K (1.9% MoM), Prior Month: 5,350K (-1.7% MoM)
  • Pending Home Sales Growth (Month-over-Month) – Consensus Estimate: 0.5%, Prior Month: 1.2%

Thursday, 1/23/2020

  • Initial Jobless Claims – Consensus Estimate: 213,500 (4.7% WoW), Prior Week: 204,000 (-5.1% WoW)
  • Leading Economic Indicator Index (Month-over-Month) – Consensus Estimate: -0.2%, Prior Month: 0.0%

Friday, 1/24/2020

  • No Data

     

     

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