2/21/2020 – Stocks Down on the Week

Stocks pulled back this week after two positive weeks and remain up slightly on the year. It was a relatively quiet week in financial news, but one interesting development is the continuing decline of the US 10-yr Treasury rate. The key rate dropped below 1.5% this week. Yields decline when investors buy Treasuries and generally people buy Treasuries when they are nervous about economic growth. The coronavirus situation hasn’t abated and will hurt growth and earnings in at least this quarter. That alone doesn’t seem like enough to push Treasury yield to near historic lows though. Employment remains strong, consumer spending continues to rise, but the 10-yr Treasury yield is almost half a percentage point lower than at the beginning of the year. That’s move worth monitoring going forward. Read More

Morgan Stanley announced this week it was buying E-Trade is a $13 billion transaction. Consolidation in this industry was inevitable following all the firms eliminating most stock trading fees last year. Schwab announced it is buying TD Ameritrade late last year, although the deal hasn’t closed and could hit anti-trust hurdles. Morgan Stanley – E-Trade seems less likely to be derailed by regulators and I would expect a closing in late 2020 or early 2021. The real question is what this means for you. At this point, this seems like a net positive. The E-Trade platform will likely remain and potentially add some new capabilities available through the Morgan Stanley platform. The combined company will have over 8 million client accounts and over $3 trillion in client assets. Read More

Oil increased this week, increasing 2.2% to close at $53.38/barrel. The yield on the 10-yr Treasury moved lower to close at 1.47%, from 1.59% last week. The average rate on a 30-yr fixed rate mortgage moved higher to 3.49% from 3.47% a week ago.

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