Weekly market update
Stocks edged higher in a holiday-shortened week with the Dow rising 0.75%, the S&P 500 climbing 1.04% and the NASDAQ climbing 1.72%. For the month of November, the Dow rose 3.7%, the S&P 500 climbed 3.4% and the NASDAQ went up more than 5%. The S&P 500 has made 10 new all-time highs this month, the most in the month of November since 12 in 2014.
The U.S/China trade talks once again dominated the headlines. First, it was China’s top negotiator saying it reached a ‘consensus’ with the U.S. in a phone call on how to resolve trade war issues. That positive news stemmed from talks two weeks ago. President Trump says we are in the final throes on reaching a deal and the markets acted as they have been—moving higher.
These gains are not limited to the U.S.—much of the Eurozone, Japan, Germany and Australia are also making new highs, despite no resolution on trade.
One of the biggest developments has been the small caps as measured by the Russell 2000 index. Although the Dow, S&P 500 and NASDAQ have been notching new highs, the Russell 2000 index has been sitting out the rallies. But, in November, they also rallied some 5% leading many traders, investors and analysts to believe that they are trying to get back in the game. The index is still trading about 7% from its all-time high, however—so it has some catching up to do.
Turning to the economy, most of the data last week came in better than was expected.
New home sales surged in the latest report and these are signed contracts for new homes, which is a leading indicator. I mentioned last week we needed a boost from the housing market—maybe we are seeing it unfold.
The second read on Q3 GDP was revised higher, from 1.9% to 2.1%. Hey, we’ll take what we can get. Consumer confidence also rose to another lofty 125.5. Durable goods orders were better than expected. We also saw personal spending rise more than anticipated, yet personal incomes were flat. Jobless claims fell sharply as well. The worst data was from the Chicago FED National Activity Index for October which came in quite a bit worse than expected.
Right now, the markets are being held captive to the trade talks/deal, but stocks seem to be expecting something—at this point—anything. It seems that when stocks start falling, the President sends out someone from the administration to say how well the talks are going—we’ve been doing this for how long, 18 months. Economic data, both here and abroad, are important, but nothing like some resolution on trade.
At the time of this writing, stocks are falling—anyone want to guess why—it was reported Monday morning that China won’t do a deal unless tariffs are rolled back, and it is reported that President Trump said if there isn’t a deal by December 15th we are going to hit them with more tariffs. Oh boy—you can’t make this stuff up.
This week is on the light side where economic data is concerned. We do get the jobs report on Friday and that is always important, especially as the trend has been going down. We will also get the ISM and PMI manufacturing & services reports. Lately, we have seen quite a divergence between the two reports, especially on manufacturing.
So, please stay tuned and we are committed to keeping you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
