US stock indices continue to show exceptional performance

January 20, 2020 11:30

Last week, sentiment in the equity markets remained strong and investors chose riskier instruments. The sentiment was not affected by news that Chinese tariffs will not be lowered before the US presidential election in November, as the already signed first-phase agreement includes a 10-month deadline to evaluate results and fulfillment of commitments made from the date of signing.

The leading US indices have shown very good weekly performance and have returned to new all-time highs. The top performer was the Nasdaq Composite, rising 2.3%. One of the leading index companies, Alphabet or formerly Google, has achieved a symbolic capitalisation of 1 trillion USD. Currently, companies worth more than 1 trillion USD are Apple, Microsoft and Saudi Aramco, the state-owned oil company in Saudi Arabia. The Dow 30 was up 1.8%. The S&P500 index appreciated by 2.0% to 3,330 points and finished the trading week at an all-time high. Interestingly, the S&P500 index has not experienced a correction of more than 1% for 70 consecutive trading days.

China's main stock index, Shanghai Composite, ended the week depreciating 0.5%. A number of important indicators were published in the country. Economic growth in the fourth quarter was 6.0% per year and was in line with market expectations, although it was at its lowest level in 29 years. Other indicators were relatively stable compared to recent months: the industrial growth was 5.7% year-on-year, retail sales increased by 8.0% and investments increased by 5.4%. Overall, the country is still experiencing a moderate deceleration in growth, but not as fast as in the first nine months of 2019, which is likely to allow major trading partners to take a breath.

In the US bonds market, the spread between 2 and 10-year bonds was stable at 0.27%, while the spread between 3-month and 10-year bonds also remained stable at 0.29%. Overall, bond markets remain stable.

In the commodities segment, sentiment was consistently positive. WTI oil price recorded a slight fall of 0.4% to 58.8 USD per barrel. In the metals market, the price of copper increased by 1.2% and aluminum appreciated by 0.8%. Iron ore appreciated to 94 USD/T.

Utility and technology companies showed the best performance in the sector last week, rising 3.4% and 2.6% respectively. Financial and commodities companies were among the relatively worst performing sectors, rising 1.5% and 0.2% respectively.

Last week was the start of quarterly financial results announcements for US companies. It began with good news from the largest US bank, JPMorgan Chase, which announced its fourth-quarter financial achievements on Tuesday before the exchange opened. JPMorgan is the largest US bank with 2.6 trillion USD in assets and one of the oldest financial services institutions in the country with a history of over 200 years. The Bank operates in a number of business segments, including retail banking, investment services, business financing and asset management. The company employs about 250 thousand people.

JPMorgan generated 29.2 billion USD revenue last quarter and exceeded market expectations of 27.9 billion USD. Revenue growth was 9%. The investment banking division performed the best, and its outstanding performance was due to the trading income of debt instruments. Adjusted earnings per share were 2.57 USD for the quarter, above market analysts' estimates of 2.35 USD. Overall, in 2019, JPMorgan's financial performance, especially considering its net annual profit of 36.4 billion USD, was the best in the US banking history.

After the news, the stock price appreciated about 1.3% to 139 USD but did not reach the all-time high of 141 USD on January 2, 2020. The stock price has risen about 38% over the last 12 months. The company pays a dividend yield of 2.6% per year and actively buys its shares in the market, reducing their number and increasing earnings per share.

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