Weekly market update
U.S. and China trade relations continued to dominate the headlines last week which sent stocks lower. The Dow fell 0.41%, the S&P500 fell 0.29% and the NASDAQ fell 0.2%.
The week started out well with the Dow, S&P500 and NASDAQ making new highs, but still closing lower. On Wednesday, Reuters reported that the completion of the so-called “phase one of a trade deal” might get pushed into 2020 and there were other headlines that China was demanding that the December tariffs and all other ones as well needed to come off for this to move ahead. All the while, President Trump was making heightened demands of his own.
China did invite top U.S. trade negotiators for a new round of face-to-face talks in Beijing amid continued efforts to strike at least a limited deal, the Wall Street Journal reported. The report said Chinese Vice Premier Liu invited U.S. Trade Representative, Robert Lighthizer and Treasury Secretary, Steven Mnuchin.
In the end, the market doesn’t desperately need a “deal,” there was no “deal” during the Cold War. It takes time to resolve issues like these. But guess what? U.S. companies will do what they always do: whatever it takes to grow.
Earnings were a mixed bag among big-box retailers. Home Depot and Kohls got slaughtered after their earnings and the very next day, Lowes and Target crushed it.
Turning to the economy, we got the release of the FED minutes from their October meeting and despite “elevated risk to the downside”, the FED would be on hold as far as cutting rates unless something unforeseen happens.
Housing starts and building permits (best since May 2007) came in much better than expected—we could use a boost from the housing market. Jobless claims remained unchanged and are trending at pretty low levels. The Philly FED index rose better than expected but the Kansas City FED manufacturing index came in still at negative numbers.
Not that it will matter to the ISM cultists, but the Markit Manufacturing PMI just improved to 52.2, its best level since April. New orders jumped to 53.0, also best since April. Production hit a 10-month high of 53.1. Manufacturing isn’t booming, but hardly collapsing either.
The index of leading indicators fell for the third straight month and this is something I will be watching closely.
Finally, the University of Michigan consumer sentiment survey rose better than expected and the highest level since July as rate cuts helped boost sentiment.
So, this week is a holiday shorted trading week and I expect volumes to be low. We will get the second estimate of third-quarter GDP, consumer confidence report and durable goods orders. Other than that, we’ll be hanging on the headlines and “waiting on a trade deal”. Have a safe Thanksgiving and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
