In this week’s recap: the blue chips have their best week of 2019, as investors like what they hear from the head of the Federal Reserve and interpret the latest monthly employment numbers.
THE WEEK ON WALL STREET
Following a mixed Monday, the market jumped Tuesday after dovish remarks from Federal Reserve Chairman Jerome Powell. Breaking out of a 6-week losing streak, the Dow had its best week since November.
Stocks rallied during a week in which Wall Street was buffeted by headlines. The S&P 500 rose 4.41%. The Nasdaq Composite and Dow Jones Industrial Average respectively added 3.88% and 4.71%. The MSCI EAFE index of overseas stocks improved 2.02% across five days.
Late Friday the President announced a deal had been reached with Mexico to stave off his threat of tariffs related to immigration. For now, the focus on tariffs can go back to China and whether some sort of agreement can be reached. I fear, with the successful use or threat of tariffs against Mexico, the President has a new toy he may try to use against other nations. While tariffs may be useful short-term negotiating tactics, they are ultimately taxes upon the American consumer and are bad policy for the long term. History will let us know which they turn out to be this go round.
JEROME POWELL’S COMMENTS
Speaking at the Federal Reserve Bank of Chicago, the Fed chair stated that central bank officials “will act as appropriate to sustain the expansion” of the economy in the face of “recent developments involving trade negotiations and other matters.” The next 2-day Fed policy meeting ends on June 19, with a press conference to follow. At this point, many "experts" are thinking the Fed may provide 2 rate cuts before the end of the year. Just nine months ago, the market was panicking the Fed would raise rates too fast. Stay tuned.
Employers added just 75,000 net new jobs to their payrolls in May, according to the Department of Labor. Economists polled by Reuters thought that the gain would be 185,000. The main unemployment rate held at 3.6% last month; the U-6 rate, which includes the underemployed and those who have stopped looking for work, fell 0.2% to 7.1%. To some analysts, the weak May hiring number hints at private-sector concern over tariffs. To others, it simply signifies the possibility that the economy may be at or near full employment.
THE WEEK AHEAD: KEY ECONOMIC DATA
Wednesday: The latest Consumer Price Index, showing the rate of inflation in May and across the past 12 months.
Friday: The Census Bureau’s May retail sales report as well as the University of Michigan’s initial June consumer sentiment index, measuring consumer confidence levels.
While breaking news does often merit investor attention, refrain from letting the headlines of the moment prompt you into emotional decisions. Brace yourself for further headlines that may drive market volatility, because new developments are arriving quickly in the financial markets. Finally, the great market technician Walter Deemer said: "If you want to watch CNBC like the professionals, turn the sound off." Nothing could be more true.
Have a great week!
These are the views of FMG Marketing Library, and not necessarily those of Nick Toadvine, or Calton Associates, Inc., and should not be construed as investment advice. Neither Nick Toadvine nor Calton & Associates, Inc. gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.