China continues to drive American markets, whether Donald Trump has a hand in it or not.
During the first month of 2020, equities reached record highs in the days after the United States and China signed their long-awaited, endlessly negotiated, phase one trade deal on January 15, reducing tensions between the two countries. But the boost was short-lived.
In the second half of the month, a virulent outbreak of the corona virus, originating in the Chinese industrial city of Wuhan, crushed the stock markets around the world. It is not yet clear how long it takes to contain the virus, which sometimes causes fatal respiratory infections. More than 17,000 people, mainly in China, are currently infected, with 361 deaths so far.
This allows shares to struggle for some time to steer direction. Both and both saw a solid monthly profit of 3.3% or so disappear completely. The two indices ended the month with their first losses in January since 2016.
DJIA 300-minute ticket
The decrease is 0.2%. The Dow fell 1%.
The, up to a whopping 5.3% on January 24, ended higher with just 2% for the month. The, dominated by big-tech stocks, closed nearly 3%, but the index had risen by no less than 6.17% for the month on January 24.
Geopolitical Surprise Triggers Selloff
If the volatility of January was a surprise to many, the reason for that was an even bigger surprise. The Chinese government was slow to recognize the virus. But the decision to stop all public transportation to and from Wuhan on January 23 was a huge wake-up call for both the Chinese and global markets.
The Dow fell 219 points early in the day before he recovered. The next day, however, the blue chip index fell 170 points on January 27 and then 454 points.
As the news deteriorated, American Airlines (NASDAQ 🙂 immediately stopped flights to and from mainland China on Friday. From Thursday, February 6, both Delta Air Lines (NYSE 🙂 and United Airlines (NASDAQ 🙂 will suspend all their flights to the area, with Delta announcing that the service interruption will last until April 30, while United and American say they will stop the service March 28 will resume, although each airline also says they will continue to monitor the situation for additional developments. Shares fell 6.4%, 4.7% and 15% for the month respectively.
WYNN 300 minute card
Shares of casino operator Wynn Resorts (NASDAQ :), which has a huge investment in the casino business in Macau, fell by 9.2% after an increase of nearly 15% in December.
Hotels saw bookings with Chinese properties declining. With chains such as Hyatt Hotels (NYSE 🙂 and InterContinental Hotels (NYSE :), customers can cancel reservations without penalty.
The majority of the 10.6% decline in InterContinental's share in January took place in the second half of the month. Hyatt decreased by 5.8%.
Disney (NYSE 🙂 has closed its two theme parks in the Greater China region – Disneyland Hong Kong and Shanghai Disney Resort. Shares of the entertainment giant fell by 4.4% this month.
On the other hand, shares of Lakeland Industries (NASDAQ :), that makes safety clothing for industrial situations, jumped nearly 51% in a week because investors speculated that there would be a demand for the company's products. Alpha Pro Tech (NYSE :), which produces face masks and other protective equipment, saw his stock jump 95%.
Volatility not only powered by China
However, the January curves on the market were not entirely due to the corona virus. Many US stocks, especially technology stocks, rose to overbought levels in the fall of 2019, with purchases continuing in January. The epidemic forced people to sell and exit the market or to make a quick profit.
In January, both Alphabet (NASDAQ 🙂 and Amazon (NASDAQ 🙂 achieved a market capitalization of $ 1 trillion. Friday's sales pushed the valuations of both companies back to just below the trillion dollar level.
Apple (NASDAQ :), whose shares rose 86% in 2019, reached a peak of $ 327.85 on Wednesday and then fell by 5.6% in the next two days.
Interestingly enough, the outlier in all of this is the manufacturer of electric vehicles Tesla (NASDAQ :), who reported the results of the fourth quarter last week. The shares of the company ended the month with a whopping 55.5% with a gain of 26% in the fourth quarter. The shares now sell 48 times projected 2020 income.
Another winner in January, for reasons completely unrelated to geopolitical events, was Beyond Meat (NASDAQ :), the creator of vegetable meaty hamburgers.
BYND Weekly TTM
Shares, which were peripitant dropped from their 52-week high point of $ 239.71, hit in the summer of 2019, jumped 48%. Two reasons for the move: Denny & # 39; s restaurant chain is expanding its BYND product trial from Los Angeles to 1,700 restaurants, and McDonald & # 39; s will be testing hamburgers at Canadian stores. That said, the shares have been hit by sales talks from analysts who believe that the shares are hugely overvalued.
Homebuilders were among the strongest market players in January, hoping for a decent domestic economy (and little direct effect of the corona virus). Strong demand, especially from wealthy buyers and ultra-low interest rates, probably caused the movements. Lennar (NYSE :), PulteGroup (NYSE 🙂 and DR Horton (NYSE 🙂 were among the top six S&P 500 artists in January, with 21.5%, 20.7% and 16.4% respectively.
Sector weakness deepened while additional rally drivers are missing
There was also a significant sectoral weakness during the month.
Energy was the biggest hit by far. The S&P 500 fell 11% this month as oil prices fell. , US crude oil fell by more than 15.5% and ended January at $ 51.56 a barrel. fell 14.2% to $ 56.62 per barrel as the month ended.
The number of companies in the United States has fallen by 26% since 2018, more than half since 2008.
Exxon Mobil (NYSE 🙂 and Chevron Corp (NYSE 🙂 were among the weakest Dow shares on the month, down 7.4% and 7.8% respectively. Oil service giant Schlumberger (NYSE 🙂 fell 16.6%. Oil and gas production companies saw their shares fall 15% or more. Noble Energy (NASDAQ 🙂 decreased approximately 20%.
Traditional retailers against competition from online retailers, especially Amazon. Macy & # 39; s (NYSE 🙂 fell 6.2% for the month after a December rally of 10.9%. Target (NYSE 🙂 Tumbled 13.6% after a profit of 25% on the profit of 25% the month before.
Looking ahead requires some perspective. A good piece of the stock market rally in 2019 was a revival after the sell-off in the fourth quarter of 2018. That catalyst has now disappeared.
Plus, China is still trying to contain the corona virus. If it cannot be brought under control quickly, investors can increase their rush to safety – including or Treasurys. Equally important is the continuing vulnerability of the market to a sell-out that is strictly driven by high prices, especially among expensive large tech stocks that attract the most attention from investors.
Nevertheless, the economic background remains favorable. Europe looks at least stable, although there are likely to be tensions if the continent and the British Brexit learn to interact.
The US economy is growing, albeit modestly, with a record low. And there has been something. Moreover, there is an idea that interest rates will not rise.
That's good for buying big-ticket times such as cars and trucks and houses. And of course Trump doesn't want a recession either.
