Weekly Market Snapshot

Once again, China adjusted the criteria for recognizing COVID-19 cases (over 76,000 reported cases as of February 21, with 2,248 deaths). The immediate direct impact on the global economy is through supply chain disruptions and reduced travel/tourism (in China and throughout Southeast Asia). Apple cited the virus in cutting sales expectations. The State Department overruled the Centers for Disease Control and Prevention, allowing 14 infected Americans to fly back to the U.S. with over 300 other passengers.

FOMC minutes from January 28-29 showed that officials felt that the current stance of monetary policy was appropriate. The coronavirus, which had only recently made the news, “warranted close watching.” Support for the repo market was expected to be gradually reduced and phased out after April.

The Producer Price Index rose more than expected in January, boosted by increased margins in apparel and a jump in the price of iron and steel scrap. Ex-food & energy, the PPI for consumer goods was unchanged (+1.3% y/y). Residential construction figures were stronger than anticipated, likely boosted by unseasonably warm weather. The Conference Board’s Index of Leading Economic Indicators jumped 0.8%, after falling 0.7% from July to December.

Next week, the second estimate of 4Q19 GDP growth is expected to remain close to the advance estimate (2.1%), although we may see some revisions in inventories and foreign trade. Consumer Confidence is expected to remain elevated. Durable goods orders should reflect weakness in aircraft, following the halt in production of the Boeing 737 MAX.