Market Review February 2020

  • Robert Santarpia

Coronavirus Outbreak Plunges Stocks in Worst Month since 2008

Without a doubt, February’s top story is the impact of the Coronavirus on U.S. and world markets. The impact of the virus on nearly every aspect of the financial world is not merely a shadow of the human toll the disease is taking as we do not know the how many are infected or the death rate. However, we know the response from governments and businesses alike has been to temporarily shut factories, cancel conferences and even close schools and universities for weeks at a time. The inevitable result will be slower business activity for at least the next few weeks.

From North America to Europe and Asia, significant losses are predicted and already measurable in crucial sectors like oil, travel, and trade. Health experts predict the Coronavirus will get worse before it gets better, leading to the Federal Reserve doing a 50 basis point rate cut on March 3. Meanwhile, global interest rates are falling, and treasury bond yields are falling to new lows. The 10 year bond rate registered its lowest rate ever. The following rates from the U.S. Treasury going back to 1870.

Across the world, countries are slashing growth estimates, and air travel companies are preparing for record losses as flights get canceled and see decreasing attendance. Goldman Sachs researchers notably released a memo titled “Gloom but Not Doom,” perfectly encapsulating the fact that things are bad, but not catastrophic.

Unemployment for Disabled Americans Declines to 7.3%

A long suffering sector of the jobs market has been persons with a disability. The U.S. Bureau of Labor Statistics reported the unemployment rate among this population declined to 7.3% in 2019. The population of persons with a disability tends to be older in age, and usually works part-time more often than full-time. Still, advancements in technology and increased profits in major retail and services sectors are making it possible for employers to hire persons with a disability.

This demographic is often left out of the running of certain jobs with various physical and mental requirements for performance. Strides can still be made however; the unemployment numbers for this population are double the numbers of those without a disability. Furthemore, many of the 60,000 participants in the findings listed they are not looking for a job. Because of many conditions that warrant official disability classification, a job isn’t always possible.

Wireless Companies Facing Major FCC Fines on Location Information Management

The top four wireless carriers in the United States are facing major fines from the FCC. The rates to which each company is being fined was determined by the FCC’s investigation into the mismanagement of customer’s location information. Most smartphones run on apps which heavily use the phone’s GPS technology to track the user’s location. The country’s four major carriers were all found to be failing to protect the location information from third party applications and hackers. Those companies include T-Mobile, AT&T, Verizon, and Sprint.

Reuters reported that while the FCC is announcing the fines, the companies will have the opportunity to appeal the proposed penalties. T-Mobile US Inc faces fines of more than $91 million, AT&T $57 million, Verizon $48 million, and Sprint more than $12 million.

GM Adds Jobs at Michigan Plants as Detroit Auto Production Thrives

For years, Detroit was the Motor City. After major losses to foreign carmakers, GM was forced to close plants, cut thousands of jobs, and receive a historic bailout from the Federal Government. Since 2015, GM has invested more than $1 billion back into Lansing, MI, and more across the entire state of Michigan and beyond. GM announced in February new projects that would lead to the hiring of 1,200 new employees. The Cadillac brand is set to debut two new sedan-style cars, and the employees hired to Lansing’s GM plant will work on the new cars.

Increased popularity in the Chevrolet Traverse and Buick Enclave are also leading to the creation of a third shift at the Lansing plant, and 800 additional jobs. While Japanese car companies like Honda and Toyota continue to grow internationally and here in the U.S., GM has been able to keep up while adapting their production to fit a growingly technological and environmentally conscious auto industry.

E-Commerce Furniture Giant Wayfair Continues to Lose Money After Impressive Start

Wayfair was set to give Amazon a run for its money, at least in the furniture department. The e-commerce retailer specializes in furniture and home fashions, but is faltering fast after its impressive start upon its 2002 debut. Despite a growing brand name and popularity, the company has never posted a profit. While that’s normal in the early days of a business, the company reported 18 years later a $985 million lost in 2019 alone, according to an earnings report. Wayfair is set to cut 3% of its employees, as well as change the way the company “leverges costs,” according to CEO Niraj Shah. The earnings report was quick to point out additional loses pending the severity and financial implications of the Coronavirus. 50% of the company’s products are produced in China, the epicenter of the Coronavirus outbreak.

India’s Economy Continues to Grow, But More Slowly

Lastly, India’s economy posted a 4.6% rate of growth last quarter. The country’s financial influence is nearing that of China’s according to a recent report from The Wall Street Journal. While growth is always a good sign, the 4.6% is the lowest quarterly growth of the country in 11 years. Both consumer and corporate spending fell last quarter, leading growth to dip below 5%. The previous quarter grew 4.5%, so the slight uptick is positive, yet still a sign of a gradual decrease in the rate of economic growth. As mentioned in many reports for the month, the Coronavirus is expected to impact India’s growth projections as well.

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