Market Commentary for the Week Ending 9/13/2019
-Darren Leavitt, CFA
It was an exciting week on Wall Street as US markets posted their third weekly advance. A de-escalation of trade tensions along with new central bank stimulus measures from the ECB and decent economic data here in the US pushed the S&P 500 above the 3000 level and also urged the Dow above 27,000. For the week the S&P 500 gained 0.96%, the Dow increased by 1.57%, the NASDAQ lagged a bit but was up .91%, and the Russell impressed with an increase of 4.85%. A noticeable trend in support of value versus overcrowded trades in high flying growth stocks and US Treasuries emerged last week. The 2-year note yield gained 27 basis points during the week to close at 1.79%. Similarly, the 10-year bond yield increased by 35 basis points and closed at 1.90%. Oil prices fell 2.8% on the week to close at $54.88 as National Security Advisor, John Bolton, left the administration. His departure led some to believe that Trump may ease some of the Oil sanctions currently placed on Iran and in turn increase supply which helped move prices lower. Gold, considered another safe-haven asset, also fell last week. The commodity lost roughly $15 to close just below $1500 an Oz. There were no changes to our models last week.
A delay in an increase of tariffs on 250 billion in Chinese imports to October 15th from October 1st announced by Trump during the week along with a Chinese announcement that it would exempt tariffs on US soybeans and pork imports aided gains in the markets. Additionally, there was some rhetoric out of Washington that suggested the administration might be open to some type of interim trade deal which also encouraged the sentiment around trade.
The European Central Bank announced last week that it would be adding more stimulus to its economy by cutting its deposit rate to -0.5% from -0.4%. The ECB also announced that it would restart a bond-buying program also known as “Quantitative Easing” that will buy 20 billion euros per month in bonds starting November 1st. Additionally, China reportedly is set to begin an easing cycle later in the month to further help in their stimulus efforts. It is also widely expected that the US Federal Reserve will cut by another 25 basis points at their next meeting to be held September 17thand 18th.
The US consumer continues to be resilient. Retail sales in August were up 0.4%, which was better than the 0.2% expected but down from the revised July figure of 0.8%. A tight labor market continues to provide a solid backdrop for the consumer. Initial Jobless Claims for the week came in 15k to 204K versus the expectation of 218k. Preliminary University of Michigan Consumer Confidence also came in a bit better with a reading of 92 versus expectations of 90.2.
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