Castlestone Management

WEEKLY COMMENTARY – 03.07.2020

U.S. Equities

Stocks ended a volatile week with slight gains, as the spread of the viral coronavirus cast a shadow over economic activity, accelerating purchases of assets perceived as safe havens and placing additional pressure on those considered risky, like stocks. Volatility reappeared as the CBOE Volatility Index (VIX) spiked to over 40. The Dow has already registered swings of 3% or greater on five occasions so far in 2020. That is the most since 2018, which produced five such swings for the entire year. The volatility is a result of the uncertainty surrounding the spread of the repertory virus. On the week the Dow gained1.8% to settle at 25,864.78, the S&P 500 added 0.6% to 2,972.37 and the Nasdaq inched up 0.1% to 8,575.62.

Treasuries

Treasury yields continued to slide this week as investors moved into the perceived safety of bonds and the FOMC’s emergency 50 basis cut, helped push bond yields to record lows. The 10-year Treasury note yield, registered its biggest weekly drop since December of 2008, falling 41.8 basis points on the week. The 2-year note tumbled 39.2 basis points over the last 5 sessions and the 30-year slid 44.2 basis points.

Dollar

The US Dollar declined by more than 2% last week as measured by the ICE Dollar Index.

Gold

Gold futures finished higher for the week, as selling in stocks and sliding bond yields helped the precious metal to pick up $105.70 over the course of the week, marking the sharpest weekly point and percentage gain since 2011.

Crude Oil

Oil continued to fall last week, pushed lower by the uncertainty of global demand and slammed Friday as a deal to cut production between the Organization of the Petroleum Exporting Countries and its allies, collapsed when Russia left the meeting. For the week WTI crude traded 7.8% lower, while Brent crude has lost 8.9%.

U.S. Equities

Stocks suffered their biggest weekly loss since 2008 amid escalating fears surrounding the spread of the COVID-19 virus and the impact it will have on the global economy. The Dow Jones and S&P 500 fell for the seventh straight day and for the week the Dow closed down 12.4% to 25,409.36 and the S&P 500 fell 11.5% to 2,954.22. The Nasdaq closed slightly higher Friday breaking its streak of down days, finishing the week off 10.5% at 8,567.37. All three major US averages closed in correction territory.

Treasuries

Several member of the Federal Reserve, including Chairman Jerome Powell, suggested this week that an interest rate cut could be in the offering as they closely monitored the impact of the Coronavirus on the global supply chain. The 10-year Treasury note yield slid 34.3 basis points and the 30-year bond yield fell 55.9 basis points over the last five sessions. The 2-year note tumbled 47 basis points, its biggest weekly drop since the September 11, 2001 attacks.

Dollar

The risk off trade in equities and the all-time lows in bond yields put pressure on the Dollar over the week, pushing it to near three week lows.

Gold

Gold futures fell 5% last week, as investors took profit to cover margin calls in their equity positions. The April contract closed at $1,566.70 an ounce.

Crude Oil

Oil futures closed down 16% for the week, the largest weekly decline in more than 11 years, as the spread of COVID-19 virus globally called into question the near term demand for crude.

U.S. Equities

Although the spread of the coronavirus still dominates the headlines, it was weak economic data from the services sector that pushed stocks lower last week. Friday’s PMI report was weaker than expected particularly in the services sector numbers and completed a series of weak government reports. The Dow Jones Average fell 1.4% to 28,992.41, while the S&P 500 dropped 1.3% to 3,337.75. The Nasdaq Composite lead all the averages lower, down 1.6% to close the week at 9,576.59.

Treasuries

U.S. Treasury yields extended their weeklong slump on Friday as investors worried that the economic impact of COVID-19 might not be contained to China. The 10-year Treasury note yield fell 12 basis points on the week to a near 5 month low. The 2-year note yield fell 7.6 basis points, while the 30-year bond yield tumbled 12.6 basis points sliding below its all time low of 1.95%.

Dollar

The Dollar Index continued its move higher last week, reaching its highest level since April of 2017. The dollar has risen more than 1 percent against China’s government-managed currency, the renminbi, in February alone. For the year, the Dollar is up more than 3.5% against the euro, 3% against the yen and more than 2.5 %against the British pound.

Gold

Gold futures gained 3.9% for the week, closing at $1648.80 an oz. The weekly percentage climb was the largest since June.

Crude Oil

Oil prices rallied over the week off of what appears to be a support level of $50.00 a barrel. WTI tallied a 2% weekly rise, based on the front-month contract, while Brent added 2.1% for the week.

U.S. Equities

Equities rose for the first four days of the week, only to see profit taking hit the market again on a Friday. Stocks have been higher over the last four weeks but the Dow has finished lower on each of those Fridays. Traders clearly don’t want to be long over the weekend. The Coronavirus certainly plays a part in the nervousness but it could be that investors are waiting for an all clear on the virus before putting new money to work that could set us up for the next leg higher. The S&P 500 rose 1.6% on the week, to 3380.16; while the Nasdaq gained 2.2%, to 9731.18; and the Dow Jones industrials advanced 295.57 points, or 1%, to 29,398.08. Both the S&P 500 and The Nasdaq closed at records. Markets are closed Monday for President’s Day.

Treasuries

U.S. Treasury yields finished higher for the second straight week. The 10-year Treasury note yield closed up nearly a basis point, the 2-year note yield climbed 2.5 basis points and the 30-year bond yield was flat on the week. The coronavirus and weak retails sales helped move yields up.

Dollar

Last week the Dollar continued its rally that began at the turn off the year.

Gold

Concerns surrounding COVID-19 and its impact on the global economy continued to feed haven demand for gold. The precious metal was up 0.8% on the week.

Crude Oil

Oil prices notched their first weekly rise in six weeks, as a report of oil purchases by Chinese refiners helped to ease worries about a slowdown in oil demand from the spread of COVID-19. For the week, prices rose 3.4%.

WEEKLY COMMENTARY – 02.08.2020

U.S. Equities

The Dow Jones Industrial average advanced 846.48 points, or 3%, to 29,102.51 last week, while the S&P 500 Index rose 3.2%, to 3327.71. The Nasdaq Composite gained 4%, to 9520.51, its biggest weekly gain since November 2018. All three hit record highs before profit taking hit the market on Friday. The concerns facing US Stocks remain the same with the exception of the Presidents Trump’s acquittal in his impeachment trial, so why do stock continue to advance? Investors have nowhere else to turn. Both Germany and China released weak economic numbers last week and the US economic data continues to show steady growth.

Treasuries

U.S. Treasury yields traded in line with stock last week, rallying to start the week and slumping on Friday. The 10-year Treasury yield climbed 5.7 basis points last week, the 2-year rose 7 basis points and the 30-year notched a 3 basis point advance.

Dollar

The Dollar moved steadily higher over the week.

Gold

As stocks rallied last week, gold saw some selling pressure. Gold prices were down 0.9% last week.

Crude Oil

Oil prices have dropped 20% since peaking at $63.27a barrel in January, as fears of a global economic slowdown brought on by the coronavirus continue to weight on crude prices.

Latest updates by Head Trader, Peter Conniff.