Market Direction Week of February 17, 2020: WMT Earnings Key

Market Direction: BULLISH alert issued 10/24/2019



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Market Direction Week Review: Following assertions last week from President Trump that “the US is working closely with Chinese authorities to fight the outbreak”, this week Secretary of Health and Human Services, Alex Azar said that American experts from the World Health Organization (WHO) and the Centers for Disease Control and Prevention (CDCP) are still awaiting final approval from Chinese authorities to travel to China and help out. Members of the Trump administration and leaders from countries around the world have placed the blame for the delays directly on Chinese authorities, criticizing them for covering up the outbreak back in December and allowing the virus to spread further than it should have, while prioritizing political stability and economic fallout. 

The new respiratory coronavirus, now officially named COVID-19 by the World Health Organization (WHO), remains one of the top news items, and it is impacting business around the globe. Here are just 3 examples:

1. Precautionary measures as well as a pullout from key participants, resulted in the cancelation of the world’s largest mobile phone conference in Barcelona Spain on 2/24 - 2/27. This conference was set to include several phone makers from China.
2. The cruise ship industry has been hit hard by the virus, including a Carnival ship in Japan under quarantine because it has confirmed 135 cases of the virus, and a Holland America ship that has confirmed no cases, but was not allowed to dock in multiple countries because it had previously stopped in Hong Kong.  
3. Post offices around the world are reporting difficulty in delivering mail and packages to China due to the large number of flight cancellations, on which mail is frequently carried.

There are currently, over 63,000 cases of the illness have been confirmed, including over 1,300 deaths, though the initial pullback in equity markets appears to be over. Of particular note however, on Thursday (2/13) China made a revision to the number of cases, which immediately increased it by 15,000; a move that not only caused a weak open in equity markets, but also bolstered claims of those who have suggested the outbreak is much larger than reported. While it is debatable whether or not the spread is slowing, it is interesting that both the SPX and the Shanghai Shenzhen 300 Index have both been rising solidly since 2/3, even as the number of cases of COVID-19 is still growing.

The total deaths of the COVID-19 outbreak compared to other outbreaks is  the past is relatively low. Historically previous viral outbreaks have not had a significant or lasting impact on equity markets and thus far, this one is no exception. After 3 weeks, the SPX is +1.5%. I will continue to watch this closely and update the table accordingly. 

This week in Germany, Angela Merkel’s proposed successor, Annegret Kramp-Karenbauer abruptly resigned opening the door for political rival, conservative businessman, Friedrich Merz to step back into contention for the Chancellor role in the 2021 election.  

UK Prime Minister Boris Johnson is apparently going through a major reshuffling of his “cabinet”, after reportedly dismissing his Business Secretary, Attorney General, Environmental Secretary, Housing Minister, and Northern Ireland Secretary, his Chancellor of the Exchequer, Sajid Javid resigned. His departure could be somewhat problematic as he was scheduled to present the new post-Brexit budget in a few weeks. 

How the market finished last week, the S&P 500 up 1.6%, the Nasdaq up 2.2%, and the Dow up 1.0%.

Market Direction This Week: We track the stock market based on our Bullish and Bearish Alerts a new Bullish Alert recently started on 10/24/19 and we suggested to our followers they can trade any new long positions based on are model. We will continue to provide you the current stock market conditions as they develop. The current stock market environment is in an uptrend (see Market Direction Mid Week Update: Trading Strategies).  

We’re now in the home stretch of Q4 earnings season. With 389 companies (78%) of the S&P 500 reporting, EPS beat 76% and Rev beat 66%.

When investors return to work Tuesday, they'll have Walmart's results to look over. The global king of physical retail shops releases sales and profits for the quarter that includes the all-important holiday shopping season. Analysts will be looking for clues on how Walmart battled Amazon and Target in the online arena. Also of interest: how the coronavirus outbreak in China is impacting Walmart's suppliers.

On the economic docket: An update on the number of new housing construction projects is due Wednesday. Economists predict a dip but an unseasonably warm January could provide an upside surprise. And sticking with housing, home resale figures come out Friday.

The manufacturing sector is being closely watched for any sign of a sustained rebound. A look at the mid-Atlantic region is published by the Philadelphia Federal Reserve on Thursday.

Speaking of the Fed: Minutes from the central bank's January policy meeting come out in the middle of the week.

And rounding out some of the potential market-moving events in the coming week: Democrats hold another primary debate - this time in Nevada - and that's followed by the Nevada caucuses on Saturday.

And any update on the outbreak of coronavirus in China is sure to sway investor sentiment.

The standard caveat still applies; “President Trump’s tweets still trump everything else”.  

Economic Calendar: PPI (2/19), Housing Starts and Building Permits (2/19), Initial Jobless Claims (2/20), Existing Home Sales (2/21)

Some of the major earnings announcements on deck: WMT, MDT, STMP, SEDG, DPZ.

$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Building a community of investors one trade at a time. Share with a friend. Cha-ching!

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