Weekly market update
Stocks finished the week mixed as the Dow fell 0.13%, the S&P 500 rose 0.55% and the NASDAQ rose 0.40%. The Dow was held back by Boeing who continues to face backlash over the 737 Max, and Johnson & Johnson who is facing more troubles after recalling more baby powder thought to contain asbestos.
Geopolitical headwinds continue to dominate the market narrative creating uncertainties that are weighing on investor sentiment.
- When will the tariff war cease?
- How deep will the impact be on business investment and consumer confidence?
- Is the current response from fiscal spending, or lack thereof, and monetary policy enough to counteract these uncertainties?
We believe that small deals rather than a grand solution will define the progress on the trade front. And further complicating matters is the impeachment proceedings regarding President Trump, Iran tensions and the Brexit proceedings.
The 10-year Treasury was little changed on the week despite intra-week volatility spurred by the Brexit proceedings and U.S. China trade developments. A draft Brexit deal led global yields higher mid-week, but market uncertainties around the timing of agricultural purchase and China’s demand on tariff removal reversed some of those gains in yields. A deceleration in economic data, notable factory activity and retail sales, amplified concerns of a slowdown and limited Treasury yields’ climb.
U.S. industrial production also fell 0.4% MoM—the disappointing data was driven by manufacturing output and auto production (think GM strikes). In the Eurozone, industrial production fell 2.8% YoY in August, marking the tenth month of contraction. In China, data revealed that growth slowed to its weakest pace in almost 30 years.
September housing starts fell much more than expected even though homebuilder confidence is soaring.
Earnings season got off to a good start with JPMorgan crushing expectations as well as BlackRock, United Health Bank of America and Citigroup. Wells Fargo and Goldman Sachs didn’t fare as well.
So, a recap of where things stand:
- S&P 500 is up +21% year-to-date, <1% below all-time high.
- The Unemployment Rate is 3.5%, a 50-yr low.
- Economic Expansion has been going on for 123 months, longest in history.
- Jobs Growth is up 108 straight months, longest in history.
- Core CPI: 2.4%, 11-year high.
- Fed: cutting rates again in 2 weeks.
This week earnings season will kick into high gear, we will get the latest PMI numbers, consumer sentiment—which is still been running high, durable goods and new/existing home sales. All of this just ahead of next week’s Federal Reserve meeting, which they are widely expected to lower rates another 25 basis points. So, stay tuned and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
