China virus, Boeing: Wealth Economic Update January 24, 2020

U.S. and World News

  • virus-471263802It is shaping up to be one of the most dreadfully memorable Lunar New Year holidays in China, a holiday that is similar in significance to Christmas in the United States. There was a massive outbreak of a deadly disease called coronavirus during the busiest travel season of the year, prompting China to quarantine 16 cities or roughly 46 million people and canceling Lunar New Year events. So far, roughly 900 people have been affected and 26 people have died with the disease having spread to other areas in the Asia Pacific Region and two confirmed cases in the United States. The coronavirus is reminiscent of the SARS virus that affected China in 2003 and shaved 0.8% off of GDP growth. China has sent military aid to the city of Wuhan, where the virus originated, as the city’s hospitals have run out of supplies. Goldman Sachs predicted that the virus would cause a demand shock in oil prices as a result of the travel restrictions and quarantines. The World Health Organization announced on Thursday that is was “still too early” to call the virus an international public health emergency.
  • Boeing is reportedly close to agreeing to a two-year credit line with Citigroup that could be as high as $10 billion. The line of credit is believed to be the company’s estimate for costs and compensation related to the 737 MAX’s crashes and grounding. Boeing announced this week that they do not expect approval for the 737 MAX to fly again until mid-2020, however, the FAA announced today that approval could come before mid-year. The new CEO of the company announced that they would not be cutting the dividend as a result of the grounding and that production for the aircraft will begin again months before it returns to service.

Markets

  • Markets pulled back this week over concerns about the corona virus. The S&P 500 lost 1.01% and closed at 3,295. The Dow Jones fell 1.20% and closed at 28,990. Year-to-date, the S&P is up 2.10% and the Dow Jones is up 1.68%.
  • Yields fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.51% and 1.68%, respectively.
  • The spot price of WTI Crude fell this week. Prices fell 7.15% and closed at $54.37 per barrel. Year to date, Oil prices are down 10.96%.
  • The spot price of Gold rose by 0.86% and closed at $1,570.69 per ounce. Year to date, Gold prices are up 3.52%.

Economic Data

  • Initial jobless claims rose by 6,000 to 211,000 and the four-week moving average fell by 4,000 to 213,000. Claims fell by 4,000 in New York.
  • Existing home sales rose by 3.6% to a seasonally-adjusted-annualized rate of 5.54 million units versus expectations for a 1.5% increase

Fact of the Week

40% of Americans can’t afford a $1,000 emergency (source: Bankrate).

Rich Gartelmann, CFP® – (630) 844-5730 –  rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

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