Weekly market update
Last week saw a milestone for the Dow Jones Industrial Average. We hit 29,000 for the first time ever before pulling back. Yet, it was still a positive week with the Dow finishing higher by 0.67%, the S&P 500 was up 0.98% and the NASDAQ gained 1.76% as tensions with Iran and the proposed signing of the Phase 1 trade deal set to occur this week.
The loser for the week and the year, so far, was the Russell 2000 small caps. They finished the week down 0.18% and are down 0.62% for the year.
The Stock Trader’s Almanac found that the first five days have a good track record of predicting the market performance in the whole year. When stocks finish that period higher, the S&P 500 has been positive 82% of the time at year-end with an average gain of 13.6%. Stocks finished the first five trading days of 2020 higher, with the S&P 500 rising 0.8%. The stock market’s indomitable run to continued record highs despite fears about trade wars, real wars and a recession still has not been enough to lure most investors off the sidelines and into stocks.
It wasn’t all smooth sailing; however, as an escalation of U.S.-Iran tensions during the period spooked investors as Iran retaliated and fired back with rocket attack on two Iraqi bases; triggering a chaotic flight to safety. De-escalation ensued afterward as Iran noted that if there was no retaliation from America for these latest attacks then Iran would stop. There were no U.S. casualties.
We got some good macro data last week as the BLS reported the economy added 145,000 new jobs. It was less than the 160,000 expected, but the previous month was 80,000 higher than expected, so all is good, for now. The ISM services index climbed to 55.0 (54.5 expected), but factory orders tumbled, so it hasn’t spilled over to the service sector yet.
The persistence of near record-low jobless claims, more job openings than people available to fill them and a strong December ADP survey tell us the jobs market is very healthy.
This week we begin earnings season and the first out of the gate will be the big banks, JP Morgan, Citi, Bank of America and Wells. We will get a fresh take on inflation with the latest read on PPI and CPI. The latest read on retail sales will give us a glance at how the holiday shopping season went. We will also get the first read of 2020 for industrial production, consumer sentiment and a couple of regional FED surveys.
At the time of this writing, stocks are again heading higher as geopolitical tensions and trade fear have subsided, so stay tuned and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
