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Afternoon Note

Cut in Half

By Charles Payne, CEO & Principal Analyst
2/6/2020 1:49 PM

The market is showing no signs of fatigue right now. News that China plans to cut in half tariffs on $75 billion worth of U.S. imports effective on Valentine’s Day got investors’ attention. This is a partial roll-back of the retaliatory tariffs from the dispute. The decision was two-fold; China is adhering to their pledge of the Phase 1 trade deal, and they want to send a message that despite the coronavirus, things will be ok.  This is good news for soybean farmers and other agriculture producers.

Communication Services sector is the leader today thanks to a bounce back in Alphabet/Google (GOOG/GOOGL) after being hit on its earnings, as well as huge increase in Twitter (TWTR) after its latest earnings, which beat on revenues, but EPS was shy of estimates.  Still TWTR is up about 17%.

S&P 500 Index

+0.36%

 

Communication Services (XLC)

+1.25%

 

Consumer Discretionary (XLY)

 

-0.07%

Consumer Staples (XLP)

+0.37%

 

Energy (XLE)

 

-0.89%

Financials (XLF)

 

-0.14%

Health Care (XLV)

+0.05%

 

Industrials (XLI)

+0.31%

 

Materials (XLB)

 

-0.16%

Real Estate (XLRE)

+0.47%

 

Technology (XLK)

+0.77%

 

Utilities (XLU)

+0.36%  

While advancers are leading decliners, its close. However, new 52-week highs far outpace the lows.

Issues:

NYSE

NASDAQ

Advancing

1,485

1,608

Declining

1,387

1,469

52 Week High

215

159

52 Week Low

27

33

 

Nonfarm Business Productivity and Unit Labor Cost

On the economic front, the BLS report showed a 1.4% increase in both productivity and unit labor cost in the fourth quarter for the nonfarm business sector. 

The long-term average for productivity from 1947 to 2019 is 2.1%, so there is still room for improvement. Growth in 2019 on the other hand was the strongest since 2010, increasing 1.7%, compared to the 1.3% average for the years 2007-2019.

Nonfarm Business Sector

Q419

Q418

Productivity Q/Q

1.40%

0.10%

Unit Labor Costs Q/Q

1.40%

0.60%

Productivity Y/Y

1.80%

1.00%

Unit Labor Costs Y/Y

2.40%

1.00%

All eyes will be on tomorrow’s jobs report.

 

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