Market Brief – Friday 1/24/20

Stocks jumped in overnight trading to open at new all-time highs but quickly sold off in early trading as reports the Coronavirus is spreading. Treasury yields moved higher in overnight trading, but quickly reversed and continued to fall in early trading with 10-year Treasury yields breaking below a key support level at 1.7%. Crude oil, along with oil and gas producing stocks, also fell over fears the Coronavirus will cause travelers to stay at home.

Markit’s Preliminary Composite PMI for the Eurozone remained unchanged at 50.9 in January suggesting the Eurozone economy could be starting to bottom but the data lacks upside growth. The Eurozone Manufacturing PMI increased slightly from 46.1 to 47.5. Markit’s Preliminary U.S. Manufacturing PMI fell from 52.4 to 51.7 and its Services PMI rose from 52.8 to 53.2.

The New York Fed accepted bids for $55.30 billion of overnight dollar loans and purchased $7,501 billion of Treasury Notes against offers of $22,564 billion making the offer oversubscribed by 3.0 times.

Stocks closed lower as fears of the Coronavirus spreading saw investors take a risk-off move as Treasury yields fell to their lowest level since early December 2019. Today’s selling was broad-based with oil and gas producing stocks among the worst performers as crude oil closed over $54 per barrel after briefly dipping down to $53 per barrel.

Large commercial banks increased their holding of Treasury and agency securities to the second-highest level in history as lending growth flatlined last week. Slowing or contracting lending growth leads to lower yields and higher bond prices.