The Market Today

Apple Warns on Coronavirus; Japan’s Economy Shrinks on Tax Increase

by Craig Dismuke, Dudley Carter

Coronavirus Update: The number of confirmed cases, as reported by the federal health agencies, has now increased to 73,322, up over 30,000 from week-ago levels.  The number of deaths is now 1,871.  Both counts now dwarf the statistics from the SARs outbreak.  On a positive note, it appears that the rate of growth of confirmed cases is slowing.  On a negative note, the number of confirmed cases outside of China surpassed the SARs total on Sunday and is growing at a concerning rate.  This will be a key development to watch this week in determining if the virus remains contained.   To see our updated Coronavirus Chartbooks, please click here.



Empire Manufacturing Index Shows Positive Momentum, for Now: The New York Fed’s Empire Manufacturing index for February rose more than expected, up from 4.8 to 12.9, the index’s second-highest reading in fifteen months.  The strength came from manufacturer’s assessment of current activity with the six-month-forward measures generally weaker.  The current reading on new orders jumped 15 points, the unfilled orders index increased 6 points and moved out of negative territory, and the shipments index jumped 10 points.  The labor indices for the sector were less optimistic.

Homebuilder Confidence: At 9:00 a.m. CT, the NAHB is scheduled to release their February look at homebuilder confidence, which has remained very strong recently.


Coronavirus Infects Apple’s Quarterly Guidance and German Economic Expectations: The idea that the coronavirus will disrupt economic activity has been widely accepted and the major driving force behind the drop in global yields over the last month. However, some early signs of disturbances in actual activity has made markets uneasy on Tuesday. The anxiousness started in Asia after Apple warned it’s current-quarter guidance was unachievable and extended into the European session after a key German confidence survey dropped more sharply than expected. Apple said in a statement it is “experiencing a slower return to normal conditions than we had anticipated,” and as a result “worldwide iPhone supply will be temporarily constrained.” Additionally, “demand for [Apple] products within China has been affected.” Later, a top economic expectations survey in Germany slumped 18 points to break a strong two-month recovery that had offered some hope of stability in Europe’s largest economy.

Risk-Off Shift to Start a Four-Day U.S. Trading Week: Shares of Apple were down 3% at 7 a.m. CT but well off the earlier lows reflecting a 4.6% decline. With Apple’s supply chain heavily concentrated in China and other Asian countries, the tech sector weighed most heavily on exchanges there. The MSCI Asia Pacific index, a broad measure of equity activity in the region, closed down 1.1% with tech companies near the bottom. In Europe, Germany’s DAX was down 0.8% while Europe’s region-wide Stoxx 600 slipped 0.5%. U.S. futures were weaker by 0.5%. Treasury yields were tracking lower, outpacing smaller yield declines in other countries. The 2-year Treasury yield was 2.9 bps lower at 1.40% while Germany’s 2-year yield inched back 0.3 bps to -0.66%. The 10-year Treasury yield dropped 4.3 bps to 1.54% while the 10-year German bund was down 1.8 bps at -0.42%. Oil prices also pulled back more than 2% amid the increased concern. The Dollar strengthened again and is now threatening a level from late September which represent the strongest level for the greenback since May 2017. Also taking some steam from the risk appetite, Japan’s economy contracted 6.3% (ann.) in 4Q after the country made another effort at hiking tax rates to reduce their fiscal deficit.


ICYMI – February 14, 2020 Weekly Market Recap: Stocks set a string of records last week despite mixed U.S. economic data and persistent uncertainty around the coronavirus. Equities notched majority of the net weekly gain early as daily updates from China reflected a slowing trend in new confirmed cases. Momentum stalled on Thursday, however, after China expanded the acceptable methods of confirming cases to include clinical diagnoses, as well as positive lab tests. The change boosted cases by nearly 15,000 on Wednesday alone. Stocks slid sideways for the rest of the week but managed to cling to modest gains. Treasury yields also erased an early-week rise and settled back near Monday’s opening levels. Several Fed officials, including Chair Powell, said it was too early to assess the virus’s impact, but stressed they were closely monitoring the situation and watching the incoming data. The data they saw last week were mixed, with stronger-than-expected readings of consumer and business confidence but weaker hard activity results. Industrial production dropped and retail sales were a notable disappointment. December’s job openings continued a disappointing downtrend while January’s CPI inflation was broadly firmer. Click here to view the full recap.

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