Economic Market/Portfolio Happenings
Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
For the week ended March 8, 2019.
Stocks were lower across the major global indices last week. Within the US, the S&P 500 declined 2.12% while the NASDAQ was down 2.43% and the Russell 2000 dropped 4.23%. Overseas the developed markets (MSCI EAFE) index declined 1.99% as the emerging markets (MSCI EM) was down 1.99%. Within the S&P, the utilities and real estate sectors squeezed out a slightly gain while energy and health care were the poorest performers. (1)
March 9th marked the 10-year anniversary of the stock market low during the financial crisis; since that time the S&P has returned 400% including reinvested dividends. Since that time we have been in an era of subdued economic growth and relatively low inflation. (2)
Interest rates came back down and values rose, with the benchmark 10-year US treasuries yielding 2.62% at the end of the week, down 14 basis points. (1)
US oil production averaged nearly 10.95 million barrels per day in 2018, a new record and up 103% since March 2009, the US Energy Information Administration reported. EIA also reported that US oil output has crossed the 12 million barrels per day threshold in the first several weeks of 2019. Nearly all of that growth has been fueled by shale, particularly in the Permian recently. (3)
The non-manufacturing (services) index jumped to 59.7% in February from 56.7% with production and new orders both rising sharply to approximately 65, an exceptionally high reading. Also encouraging, all 18 of the industries tracked said business expanded in February. (4)
The US employment report was met with skepticism due to the government shutdown and various severe weather conditions across the US during February. With just 20,000 jobs reportedly added (vs. 180,000 expected) the jobless rate declined to 3.8% for February as average hourly earnings grew 3.4% year over year, an accelerating pace over the last 3 months. (5)
New home sales and housing starts were disappointing in January, also stymied by the government shutdown and various weather conditions. Total starts were 7.8% below year ago numbers, although single-family starts were up 4.5% year over year. What gathered more attention, however, was the report on single-family permits which declined 6.7% year over year. (6) We note that mortgage rates have declined about 50 basis points over the past few months to 4.67% for a 30-year note, which could help stimulate sales during the important spring/summer season.
Proprietary portfolio happenings:
Chevron (CVX), a G50 and Core Select holding, at its analyst day management discussed production growth plans that was in line with estimates and its exposure in the productive Permian basin. Shares rose in response to the news. (7)
Costco (COST), a Core Select holding, reported sales and earnings that exceeded consensus expectations. Management noted that adjusted e-commerce sales grew 25.5%. (8) The stock rose 5% on the news.
ZTO Express (ZTO), a G33 holding, rose 3% on expectations that this Shanghai-based express delivery and logistics service company will be added to the MSCI Emerging Market index as part of a major expansion of Chinese names over the next several months. (9) Shares are now up over 27% year to date.
Did you know…
1.2 million baseballs are used by all the Major League Baseball teams during a normal season, according to Rawlings, maker of the official MLB baseball. This includes practices as well as actual games.
Sources: (1) JP Morgan Weekly Market Recap 3/11/19, (2) Barron’s “This Stock Market Still Looks Good” 3/9/18, (3) US Energy Information Administration, (4) Institute for Supply Management press release 3/5/19, (5) Bureau of Labor Statistics 3/8/19, (6) National Association of Home Builders 3/8/19, (7) Chevron Security Analyst Meeting 3/5/19, (8) Costco Wholesale Corp. press release 3/7/19, (9) MSCI press release 2/28/19