A late-day Friday turnaround couldn’t save stocks from a five-day losing streak. The Dow Industrials lost 576 points or 2.2%, matching similar losses in the S&P 500 and the Nasdaq Composite Indexes. The small-cap Russell 2000 gave back 4.26% on the week. Transportation stocks, in a prolonged decline since September, gave back another 3.3%. And there was virtually nowhere to hide with all but utilities in negative territory. Despite a small weekly gain in crude oil prices, energy stocks lost nearly 4% on average as did health care names.
Indeed, after a 10% run-up in stocks in the first two months of the year, equities needed to take a well-deserved breather and investors decided to lock in some profits. Volume on the downside, however, was not particularly heavy. There are always reasons to run to the sidelines, and this week was no exception. An anemic February labor report of 20,000 newly created jobs caught traders by surprise; as the expectation was for 180,000. However, the unemployment rate ticked down to 3.8% and December and January’s new job numbers were revised upward. Then there was news of a return for stimulus by the European Central Bank as economies continue to slow in Europe. And lousy China trade data put the icing on the cake. Although there was some good news on negotiations with the Chinese, much of the progress has been priced into stocks.
Assuming we remain in sweet spots for the economy, trade and at the Federal Reserve, equities could head higher again as headwinds subside. Conclusion: Investors should stay the course, but with valuations being high, the focus should be on high-quality stocks with growing dividends.
Here is the answer to last week’s trivia question: Fertilizer giant Potash Corp. of Saskatchewan merged with Calgary-based rival Agrium in January of last year to form what new combined company? Agrium-Potash of Canada, Inc., Nutrien Ltd, PhosAgro Corp. or The Mosaic Co. Answer: Nutrient Ltd.
Today’s Trivia Question: DowDuPont, which was created when the two chemical giants merged in an August 2017, will be splitting into three publicly-traded companies: Dow Chemical (concentrating on Material Sciences), DuPont (Specialty Products) and what other named independent entity? DuPont Pioneer, DowDuPont Agriculture Products, Corteva Agrisience or Dow AgroSciences.