The Market Bull – February 14, 2020
The major averages finish about even on mixed data. Coronavirus continues but doesn’t seem to have pandemic capability outside of China. Since Monday the major averages show solid gains with the Standard and Poors 500 Index up 62 points or 1.87% while the NASDAQ advanced 237 points or 2.5%.
Import prices were unchanged in January, while export prices advanced .7%. On a year ago basis import prices increased .3% while export prices gained .5%. This is the first month both have been positive in quite some time. That said despite considerable stimulus and emergency level interest rates for a number of years now inflation remains hard to find. While credit busts are inherently deflationary it is difficult to really put your finger on the causes of weak inflation at this point as employment is fairly strong along with retail sales while credit demand and growth has been robust. So, it doesn’t appear to be a demand issue. With corporations opting to buy back shares in record amounts in favor of capex spending excess investment leading to too much supply doesn’t seem to be the culprit either.
Retail sales rose .3% in January a little less than expectations, December was revised lower. Sales were particularly strong for building materials and restaurants while clothing sales came in very weak. On a year ago basis sales gained a respectable 4.4%. These sales trends are more or less expected to continue.
Industrial production slipped for a 7th straight month in January falling .3% on large declines in utilities and business equipment production. Strong gains in mining, motor vehicle production and parts were unable to offset the declines. As China is the workshop of the world and given the thin inventories that are a hallmark of just in time modern production I would expect the Coronavirus to have a significant impact on the Chinese economy near term. It’s anyone’s guess to date what the impact will be on the US and other developed economies.
Standard and Poors 500 Index closed at: 3,380.16 up 6.22
NASDAQ finished the day: 9,731.18 up 19.21
Gold ended trading at: $1,585.80 up $7.00