THE WEEK ON WALL STREET
A better-than-forecast jobs report prompted a stock market rally Friday, two days after traders witnessed another interest rate cut by the Federal Reserve. Both the S&P 500 and Nasdaq Composite ended the week at historic peaks, while the Dow Jones Industrial Average settled less than 12 points under its all-time record close. The Nasdaq rose 1.74% for the week; the S&P gained 1.47%. The Dow added 1.44%. MSCI’s EAFE benchmark, which measures developed stock market performance outside the U.S. and Canada, improved 0.58%.
ECONOMY ADDS 128,000 JOBS IN OCTOBER
This net increase far surpassed the gain of 85,000 projected by a Bloomberg poll of economists. These job gains occurred even as last month’s General Motors strike impacted hiring in the manufacturing sector. Unemployment rose slightly to 3.6% in October, an effect of more people entering the job market. Likewise, the U-6 rate, counting both unemployed and underemployed Americans, ticked up to 7.0%.
THE FED’S LATEST INTEREST RATE DECISION
Last week, the central bank made its third quarter-point rate cut since July, leaving the target range for the federal funds rate at 1.50-1.75%. Something was missing from the latest Fed policy statement. Since June, a passage had noted that the Fed was ready to “act as appropriate to sustain the expansion.” In the latest statement, that language disappeared. At a press conference Wednesday, Fed Chair Jerome Powell commented that Fed officials “see the current stance of monetary policy as likely to remain appropriate.”
WHERE TRADE TALKS WITH CHINA STAND
There were further negotiations between U.S. and Chinese officials Friday, and China’s commerce ministry announced that both sides had “reached consensus on principles” integral to the first phase of a new trade pact. U.S. Trade Representative Robert Lighthizer noted only that the latest round of conversation had brought “progress in a variety of areas.”
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: The Institute for Supply Management presents its latest Purchasing Managers Index for the U.S. service sector, gauging business activity and new orders.
Friday: The University of Michigan’s preliminary November Consumer Sentiment Index appears, measuring consumer confidence levels.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Monday: Marriott International (MAR), Sysco (SYY), Uber (UBER)
Tuesday: Allergan (AGN), Toyota (TM)
Wednesday: CVS Health (CVS), Qualcomm (QCOM)
Thursday: Booking Holdings (BKNG), Walt Disney Co. (DIS)
Friday: Duke Energy (DUK), Enbridge (ENB), Honda (HMC)
FINAL THOUGHTS
With recent rate cuts and many S&P 500 companies reporting good earnings, it’s not surprising to see the markets moving higher at the moment. This time of year is seasonally strong and while manufacturing is slowing in the U.S., the consumer has been picking up the slack. This year has been a pretty good year in the market, although the total return numbers can be a little misleading since we started out the year in a big hole from the almost 20% decline in the 4th quarter of last year.
The question which remains: Is this an extension of the bull market or have we entered the euphoric phase of the boom part of the business cycle that typically precedes a slowdown. The jury is still out. Stay tuned and enjoy the current positive momentum.
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November 04, 2019
