Broker Check

January 27, 2020 - Stocks Pause On Viral Outbreak

| January 27, 2020

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.

###

IMPORTANT DISCLOSURES:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Because of its narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

For a list of descriptions of the indexes referenced in this publication, please visit our website at lplresearch.com/definitions

This research material has been prepared by LPL Financial LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are:

Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed |
Not Bank/Credit Union Deposits or Obligations | May Lose Value

Tracking # 1-942544