US stocks sold off again sharply yesterday and are now officially in correction territory as measured by a 10% sell off from the all-time highs we saw just 11 short trading days ago.

The US economy expanded at a 2.1% pace at the end of 2019, but the U.S. might struggle to achieve even that modest rate of growth in the months ahead if the coronavirus isn’t contained.  The government also pegged gross domestic product at 2.1% in its preliminary estimate last month. GDP is the official scorecard for the economy.

The index of pending home sales increased 5.2% in January following a decline the month prior. This was the second strongest monthly increase in over two years.  The index measures real-estate transactions where a contract has been signed but the sale has not closed. It serves as an indicator for existing-home sales reports in the coming months.
 
Mortgage rates dropped once again to the lowest level in 3 years, as investors buy bonds dropping rates.  The 30-year fixed-rate mortgage averaged 3.45%, a decrease of four basis points from the previous week.  The 15-year fixed-rate mortgage also dropped four basis points to 2.95%.
 
With Northwest Quadrant Wealth Management, I’m Tyler Simones

The stock rout continued yesterday as diving bond yields raised more concern that the global economy is slowing significantly because of the spreading coronavirus. The 10-year Treasury bond yield hit all-time record low of 1.3%. 
 
The housing market heated up at the end of 2019, and that was reflected in growing gains in home values.  In December, home prices rose 3.8% annually on the S&P CoreLogic Case-Shiller National Home Price Index. That is up from the 3.5% gain in November.   The 20-city composite rose 2.9%, up from 2.5% in the previous month.  Leading the list of cities with the largest gains were Phoenix, Charlotte and Tampa.

According to the Conference Board, consumer confidence rose less than expected in February as people’s assessment of current conditions wavered.  The consumer confidence index came in at 130.7, up from 130.4 in January.
Shares of Home Depot fell following early gains in yesterday’s trading session after the world’s largest home-improvement retailer beat fourth-quarter earnings and revenue expectations and hiked their dividend by 10%.

With Northwest Quadrant Wealth Management, I’m Tyler Simones

U.S. stocks plunged yesterday, joining a global equity selloff, as the spread of coronavirus beyond China raised worries that the hit to overseas economic growth could be more persistent than investors expect, hampering the prospects for a global recovery in 2020.
 
In the US Bond Market the 10 Year Treasury traded at the lowest yield since 2016 and the 30 Year Treasury hit its lowest yield ever as investors rush into the perceived safety of Bonds.
 
Sales of previously owned homes fell slightly in January, but they still appear to be trending higher overall amid a mini boom in the real estate business tied to tumbling mortgage rates.  Existing-home sales slipped 1.3% last month to an annual pace of 5.46 million.  That’s how many homes would be sold if the rate of sales was the same for the entire year. Yet in a sign of how much stronger demand has gotten, sales of previously owned homes were almost 10% higher compared to the same month last year. The only reason sales probably aren’t even stronger is a lack of homes for sale.
 
The average FICO score in the U.S. hit a record high of 703 in 2019, according to Experian. That’s a two-point increase from 2018 and up 14 points since 2010.  A 703 FICO score falls within the range of good credit. The fact that many Americans have good credit scores is promising, since having a high score is key to qualifying for the best credit cards, mortgages and competitive loan rates.
 
With Northwest Quadrant Wealth Management, I’m Tyler Simones

Stocks traded lower last week and are set to open lower today as investors continue to be nervous about the surge in coronavirus cases outside of China.

The coronavirus outbreak ruined what was a solid earnings reporting season and is casting a pall on forecasts for this quarter and the rest of this year. And now with most of the earnings season in the books, look for the latest coronavirus headlines to fill the vacuum and weigh on stocks the rest of the month.  Fourth-quarter profit growth for the S&P 500 companies came in at 3.1%, and if the energy sector is excluded, the growth rate was 6.0%.

Wells Fargo, the nation's fourth-largest bank, agreed Friday to pay a $3 billion fine to settle a civil lawsuit and resolve a criminal prosecution filed by the Justice Department over its fake account scandal.  Under pressure to meet sales quotas, bank employees opened millions of savings and checking accounts in the names of actual customers, without their knowledge or consent. Since the fraud became public in 2016, the bank has faced a torrent of lawsuits. The scheme lasted more than a decade, and was carried out by thousands of Wells Fargo employees.

Warren Buffett’s annual letter to shareholders came out this weekend.  In the letter Buffett says it’s ‘almost certain’ stocks will beat bonds over the long term if interest rates and taxes stay low.

With Northwest Quadrant Wealth Management I’m Tyler Simones

There is increasing concern among investors about the spread of the coronavirus in countries outside China, with a spike in infections in South Korea, and deaths in Japan and Iran. The Chinese province at the center of the outbreak reported a sharp drop in new cases after the country again changed the way it diagnoses infections. The economic fallout also continues as automakers prepare for widespread production halts at plants around the world as the shutdown in China is leading to shortages of components. A.P. Moller-Maersk A/S, the world’s largest container shipping company, tried to strike a more upbeat tone by predicting a sharp rebound in trade in the coming months, based on expectations the outbreak may soon peak. (Bloomberg)

L Brands is nearing a deal to sell control of Victoria's Secret in a transaction that values the lingerie brand at about $1.1B, WSJ reports. Private-equity player Sycamore Partners is expected to buy 55% of the struggling business and take it private, while L Brands will retain a 45% stake that will include the Pink chain. Alongside, L Brands Chairman and CEO Leslie Wexner, the embattled billionaire who has run the retail company for more than 50 years, will step down from both roles (but remain on the board). (SA)

Morgan Stanley to buy E-Trade: The $13bn all-stock deal is a sharp escalation of the battle for middle America’s wealth management market and comes less than two months after Charles Schwab announced a $26bn takeover of its biggest rival TD Ameritrade. E-Trade has more than 5.2m client accounts and over $360bn of retail client assets, which Morgan Stanley will add to the $2.7tn of assets it manages for 3m clients.  (FT)

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.

The Fed releases minutes of its Jan. 28-29 policy meeting today, which could help explain what the central bank is thinking about potential economic risks, including those stemming from the coronavirus. It may additionally provide insight into the central bank's balance sheet policy, with Powell having indicated that both Treasury bill purchases and role of repo operations in the open markets would decline during Q2. (SA)

Facebook has been accused of downplaying the value of its intellectual property. Tax authorities say Facebook is deliberately misrepresenting the value of its assets as part of a scheme to pay less US tax, in a court case that could cost the social media company more than $9bn. The trial centers on how the company valued intellectual property, such as software and trademarks transferred to an Irish subsidiary in 2010. (FT)

The gap between open jobs and unemployed workers is about as wide as the one between the kinds of available positions and the qualifications that the workforce collectively has to fill them.  A recent survey from the Manpower Group, a job placement firm, exemplifies the chasm: Nearly 7 in 10 employers reported talent shortages in 2019, the worst level ever and a jump of 17 percentage points from just a year ago. It’s also more than three times higher than a decade ago.  The data comes as the Labor Department reports that there are still about 670,000 more job vacancies than there are unemployed potential workers.  (CNBC)

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.

Analysts are continuing to expect robust profit growth from US companies this year despite warnings about the potential impact about the coronavirus, helping to explain why the US stock market has extended its record-breaking run in recent weeks.  With three-quarters of the S&P 500 companies having reported their latest quarterly earnings and statements on the outlook for their business, analysts have shaved only a small amount from their earnings forecasts for 2020. 

Earnings growth for the S&P 500 is now projected to be 8.1 per cent, down from 9.6 per cent at the start of the year but still a healthy outlook and a re-acceleration from the estimated 1.7 per cent growth in 2019.

US industrial output declined for the fourth time in the past five months, depressed by warm weather and a halt in Boeing’s production of the 737 Max.  Manufacturing output was depressed by the halt in Boeing’s 737 Max production as the company continues to face a regulatory review that has kept the jets grounded following two fatal crashes. Excluding the production of aircraft and parts, factory output advanced 0.3 per cent.

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili.

Stocks fell yesterday, slipping from record highs, as investors grappled with a jump in reported coronavirus cases and the virus’ possible economic impact.

The number of Americans who applied for unemployment benefits in early February rose slightly, but there’s still no sign of widespread layoffs in an economy that has been expanding for a record 10 and a half years.  Initial jobless claims edged up by 2,000 to 205,000.

The cost of staples such as rent, medical care and prepared food rose in January to push consumer prices higher, but inflation more broadly was still relatively tame.  The consumer price index edged up 0.1% last month, marking the smallest increase in four months.  The cost of living in the past 12 months, meanwhile, climbed to 2.5% from 2.3% — the highest level since the fall of 2018.

Amazon has won a temporary restraining order from a federal court to block Microsoft award of a $10 billion Pentagon cloud-computing contract.  Amazon, which lost out on the bitterly disputed deal, filed a lawsuit last month asking the court to halt Microsoft’s work on the Joint Enterprise Defense Infrastructure contract. Amazon Web Services alleged the yearslong evaluation process included “clear deficiencies, errors and unmistakable bias.”

U.S. stocks traded solidly higher yesterday, with the major benchmarks hitting all-time highs, buoyed by signs of a slowdown in the number of new cases of coronavirus emerging in Wuhan China.

The sea of red ink is continuing to swell in Washington, with the federal government already racking up a budget deficit that is averaging close to $100 billion a month in the current fiscal year.  Treasury Department data released Wednesday show the shortfall at $389.2 billion in the first four months of fiscal 2020. That’s a 25% gain over the same period in the previous year and already about 40% of the total deficit for fiscal 2019.  Over the past 12 months, the government has spent $1.06 trillion more than it has taken in. All the red ink has bought the total national debt to $23.3 trillion. 

80% of the S&P 500’s companies have reported fourth-quarter earnings results.  Among those, earnings have so far beaten consensus expectations by 5.2%, and 63% of companies have exceeded their bottom-line estimates.   That compares to 5.2% and 71% over the past three years.  Aggregate earnings per share are on pace to rise 3.5% for the fourth quarter. 

A few months after Disneyland opened their biggest expansion in its history, the Anaheim theme park raised ticket prices yesterday, pushing the cost of some one-day passes above $200 for the first time.  In a press release announcing the price changes a Disney spokeswoman said, “A visit to our parks is the best value in entertainment bar none.”

With Northwest Quadrant Wealth Management, I’m Tyler Simones

The S&P 500 and NASDAQ were up slightly yesterday as investors digested testimony from the top U.S. central banking official and assessed the potential economic impact of the coronavirus.

Household debt surged by more than $600 billion in 2019, marking the biggest annual increase since just before the financial crisis, according to the New York Federal Reserve.  Total household debt balances rose by $601 billion last year, topping $14 trillion for the first time.  The last time the growth was that large was 2007, when household debt rose by just over $1 trillion.

Boeing said they booked no new jetliner orders in January, increasing the financial strain that has been building during the 737 Max crisis as airlines added no new deposits to secure a place in the plane maker’s order backlog.  Boeing delivered 13 planes last month, including six 787 Dreamliners, two 777s and military versions of its commercial jets. Boeing said no customers canceled orders, leaving its backlog for future production at 5,393 jets.

Small businesses turned more optimistic about sales and profits in the first month of 2020, but they are still struggling to find qualified workers, according to a closely followed survey.  The National Federation of Independent Business said its index of small-business optimism rebounded from a small dip in at the end of last year, rising to 104.3 in January from 102.7 in December.

With Northwest Quadrant Wealth Management, I’m Tyler Simones.

The Nasdaq Composite and S&P 500 hit fresh records yesterday as investors took heart in mostly solid U.S. fourth-quarter corporate earnings and looked beyond concerns about the coronavirus outbreak’s potential disruption to global supply chains.

Shares of the wireless carrier Sprint soared more than 60% yesterday afternoon after the Wall Street Journal reported its pending merger with T-Mobile U.S. Inc. is expected to be approved by a federal judge. Shares of T-Mobile rallied about 10%. The Journal said the judge's ruling, which would clear the way for the $26 billion merger, could be made public today. The tie-up of the nation's third- and fourth-largest wireless carriers was agreed upon two years ago, but has been held up over antitrust concerns.

Mortgage rates have dropped to the lowest levels since before the 2016 presidential election.  The 30-year fixed-rate mortgage averaged 3.45% during the week ending Feb. 6, a decrease of six basis points from the previous week. This was the third consecutive week in which mortgage rates dropped.The last time the 30-year fixed-rate mortgage was at or below this level was in October 2016, when it averaged 3.42%.  The 15-year fixed-rate mortgage also fell three basis points to 2.97%.

In other corporate news, Xerox raised its offer to buy HP Inc to $24 per share, or about $34 billion. That’s up from a $22 per share offer made by Xerox in November. Xerox shares gained 1.4% while HP advanced 1%.

With Northwest Quadrant Wealth Management, I’m Tyler Simones.

The USDA announced it will provide crop insurance coverage for hemp growers in certain counties across 21 states — including Oregon and California, but not Washington and Idaho. To be eligible, producers must comply with all state and federal laws, have at least one year of history growing the crop and have a contract for sale in place.

Precision Castparts, headquartered in Portland has laid off 150 Oregon workers due the halt in production of Boeing’s 737 MAX. The company has production facilities in Central Oregon and Clackamas county. The company had 30,000 employees at the time, including 3,000 in Oregon.

A cashless economy may not be in Oregon’s future. Democrats are proposing legislation to require businesses to accept cash. The proposed legislation would exempt most public bodies and government agencies from the requirement to accept cash.

Macy’s is closing 125 stores and cutting 2,000 corporate jobs. It did not immediately indicate which stores it will close. The store closures represent about one fifth of Macy's current total. Macy’s has eight stores in Oregon, plus one furniture store.

Columbia Sportswear reported record annual sales of almost $1 billion in fourth-quarter sales. 2019 was a record year for Columbia Sportswear Co., with sales surpassing the $3 billion mark for the first time in the company's history.

Worried by the mounting death toll from the coronavirus and drastic efforts to contain it, investors dashed for the exits as Chinese markets reopened following an extended Lunar New Year break (markets have been closed since Jan. 23). Shanghai plunged 7.7%, Shenzhen tanked 8.5% and the tech-heavy Chinext Composite slumped 6.9%, marking the heaviest loss since August 2015 in the aftermath of the bursting of an equity bubble. Officials tried to head off the panic, but to little avail. The PBOC injected $174B into money markets and cut rates by 10 basis points, while the China Securities Regulatory Commission told traders they weren't allowed to be net sellers of equities this week and brokerages were only allowed to sell to meet redemptions. (SA)

Global dealmaking got off to its slowest start in seven years in 2020, more than halving from a year earlier as companies failed to seal transactions of a similar scale.
Companies across the globe clinched $164bn worth of mergers and acquisitions in January, led by declines in dealmaking in the US and across Asia-Pacific, according to data provider Refinitiv. January marked the quietest month for takeovers since April 2013. (FT)

S&P 500 is up 19, and the NASDAQ is up 61. The MSCI International Index is down 3/10’s of a %.

With crude trading near $51 a barrel - after a slump of about 16% in January - OPEC and its allies are considering calling an emergency meeting. Potential dates being discussed begin next week, though for now the next regular meeting on March 5-6 remains on schedule. OPEC, meanwhile, is holding a meeting of technical representatives - the Joint Technical Committee - on Tuesday and Wednesday to assess the coronavirus's effect on markets and demand, according to delegates. (OPEC)

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.