Your Weekly Market Blip 3/6/20

Your Weekly Market Blip 3/6/20

Charles Dickens wrote: “It was the best of times, it was the worst of times” These words seem to sum up recent conflicting market action and economic fundamentals. The Dow ended the trading week on a down note losing 256 at 25,864. What is interesting about today is that just like last Friday the Dow rallied into the close. It had been off over 900 points earlier in the day Last weeks action was all down while this weeks action transitioned to big offsetting swings as markets appear to be finding support at certain levels. Some airline stocks were higher today in what could be considered bargain hunting. For the week the Dow actually had a net gain of 1.1%! Woot Woot!
Since I have been in this game for a few years I thought it would be good to compare 2008 with today since paying attention to fundamentals is important. Back then economic fundamentals were deteriorating. Companies were cutting dividends, businesses were closing and layoffs were the order of the day. Today however fundamentals are good as companies are raising dividends, insiders are buying stock and except in travel, people are hiring. Housing prices are up and demand for real estate is good. Back then banks saw huge losses in derivative and bond portfolios due to mark to market rules and today there is no mark to market and derivatives are regulated. Bank deposits are growing and there is an estimated $1.5 trillion in excess reserves meaning US banks have plenty of cushion against potential losses. In short the virus slowdown is coming at a time when US fundamentals appear sound. If that changes we will act but long term trends like 5G, AI, cloud computing, reshoring and the electric vehicle revolution are in place and should continue to bring positive change.
February’s labor numbers accelerated and were much stronger than expected coming in at 273,000 new jobs vs guru estimates calling for 175,000. The unemployment rate dropped to 3.5%. Jobs figures for December and January were also adjusted higher. These jobs figures are pre virus but they do allude to the underlying strength in the US consumer and job market prior to the outbreak. Worker purchasing power also continues to grow as average hourly earnings gained 0.3% and are up 3% from a year ago. Total earnings by all private sector workers are up 4.8% year over year. Labor data is a lagging indicator however and going forward the virus slowdown will have an effect on spending that is as of yet unknown.
Shares of Costco have held up well during the downturn as they are selling toilet paper, bleach and wet wipes in a stockpiling blitz fueled by the virus. Costco reported better than expected earnings yesterday with 10% revenue gain and a 4% increase in net profits. US same store sales grew 9.1% and e-commerce sales were up 28%. Stores in Asia have remained open except for two locations in Korea that had to be temporarily closed. The Shanghai location in China has remained open but the company has had to limit the number of people trying to enter the store as mobs are flocking to it for basic supplies.
GeekWire is reporting that the University of Washington today is suspending in person classes and will conduct online classes starting Monday through the rest of the quarter which ends March 20th. As a WSU grad I can only say…”Go Cougs!”