U.S. stocks fell during the holiday-shortened week, with the S&P 500 notching its third weekly loss since October 2019. A dangerous viral outbreak originating in China spooked investors globally, despite improving global data and better- than-expected earnings reports.
All four U.S. indexes we track declined during the week, with the Russell 2000 Index of small cap stocks leading losses. Value stocks weighed down equities with their worst weekly loss since October 2019. Energy stocks slid 4.2% as the worst-performing sector, while utilities gained 2.4% as the best performing sector.
This week’s economic calendar was limited. Thursday data showed the Conference Board’s Leading Economic Index (LEI) rose 0.1% year over year, signaling modest economic growth ahead. Markit’s preliminary Purchasing Managers’ Index data for January showed Eurozone manufacturing perked up to start the year amid the U.S.-China phase-one trade deal.
Global stocks lagged the United States through Thursday’s close. The MSCI Emerging Markets (EM) Index dropped 2.1% through Thursday as the Shanghai Composite Index posted its worst week since August 2019. MSCI’s index of developed-market stocks declined 1%.
Fixed income prices benefited from a rush to safe-haven assets. The 10-year U.S. Treasury yield dropped 15 basis points (0.15%), its biggest weekly drop since October. The Bloomberg Barclays U.S. Aggregate Bond Index climbed 0.53% through Thursday. Investment-grade corporate bonds and international sovereign debt led returns during the week, while high-yield corporate bonds lagged.
The U.S. dollar increased for a third straight week as China’s viral outbreak weighed on international currencies. Copper slid the most since April 2013, and oil declined as investors pulled out of globally sensitive commodities. Gold rose during the week.
The economic calendar ramps up next week with several important releases. Investors will get an initial look at fourth quarter gross domestic product (GDP) on Thursday, and the Federal Reserve is scheduled to kick off its first policy meeting of 2020 on Tuesday. The calendar also includes a series of December housing reports over the first three days of the week, plus updated consumer confidence and durable goods data on Tuesday.
Internationally, investors will be watching the Eurozone’s fourth quarter GDP report, as well as
manufacturing and services activity data from China.
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