Stocks slide. U.S. stocks are down this morning as China has continued to take measures to stop the spread of a dangerous virus. There are still few indications that this outbreak could have significant global economic impacts, but the sudden influx of reports has spooked investors enough to sell U.S. stocks at record highs. The S&P 500 Index has dropped about 1% from a record high and is poised for its first back-to-back decline since early December. The 10-year U.S. Treasury yield has also declined to a three-month low of 1.61%.
Earnings resilience. With 88 S&P 500 companies having reported, fourth quarter 2019 earnings growth is tracking to a 1.9% year-over-year decline, 0.5% above the prior week. While the earnings beat rate at 73% is typical at this point, the slight increase in 2020 S&P 500 earnings estimates since December 31 is encouraging amid progress on trade and global growth stabilization. It’s still early in the reporting season and 2020 has barely begun, but our confidence in this year’s earnings has increased slightly in recent weeks.
The week ahead. The economic calendar ramps up this week with several important releases, which could distract investors from global affairs. Investors will get an initial look at fourth quarter gross domestic product (GDP) on Thursday, and the Federal Reserve is scheduled to kick off its first policy meeting of 2020 on Tuesday. About 150 S&P 500 companies are also slated to report fourth quarter results in one of the busiest weeks of the earnings season. Internationally, investors will be watching the Eurozone’s fourth quarter GDP report, as well as manufacturing and services activity data out of China.
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