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  • November 18, 2019

Week in Review

Week Ending: Friday, November 15, 2019

Recap & Commentary

Equity markets generally ended the week lower, with the exception of U.S. large cap stocks. The S&P 500 recorded its sixth consecutive week of gains, the longest such streak in two years, while closing out the week with three consecutive record highs. In addition, the Dow Jones Industrial Average closed above 28,000 for the first time ever. Comments by the White House suggesting that a trade deal between the U.S. and China was close to being finalized helped propel the indices.

Speaking before Congress, Fed Chair Jay Powell intimated that the Fed is unlikely to lower rates again in the near-term due to the “sustained expansion of economic activity”. That did not come as a surprise given that the Fed has lowered rates at each of its last three meetings and Chair Jay Powell previously described the July rate cut as a “mid-course correction”.

Chinese data released during the week suggested that the effects of the current trade war continue to weigh on economic growth. Industrial production, retail sales, and fixed asset investment (large-scale infrastructure spending) all missed consensus expectations and declined from the prior month. The 5.2% growth in fixed asset investment was the weakest in at least two decades.

Through Friday, 92% of S&P 500 companies had reported third quarter earnings. Thus far, 75% of companies that have reported have beaten their earnings estimates, while 60% have beaten their revenue estimates. For the full quarter, S&P 500 earnings are expected to decline -2.3% from 3Q18.

Economic Bullet Points

The Consumer Price Index (CPI) rose 0.4% in October, the most in seven months. Core CPI, which excludes volatile energy and food prices, also rose in the month, up 0.2%. On a y/y basis, headline CPI edged up slightly to 1.8% from 1.7% in September, while core CPI ticked down to 2.3% from 2.4%.

The Producer Price Index (PPI) rebounded a notable 0.4% in October. Despite the increase, annual inflation pressures weakened. On a y/y basis, PPI has declined to 1.1%, the slowest pace in more than three years, while PPI ex-food and energy eased to 1.5%, the least since February 2017.

Retail Sales rebounded 0.3% in October. On a y/y trend basis, retail sales were up 3.8%, which is weaker than where they were in mid-2018, but better than earlier this year. This suggests that the pullback in consumer comfort over the past several weeks has not impacted consumer demand.

Industrial Production fell by 0.8% in October. While the GM strike and utilities accounted for most of the pullback, mining continues to retrench, and the underlying trend in manufacturing output remains subdued.

Small Business Optimism, per the NFIB Small Business Optimism Index, rose 0.6 points to 102.4, remaining close to its cycle high as business owners continue to express a high degree of confidence in overall economic conditions.

Of Note

China’s Singles Day, the world’s largest retail event, set a new record with over $70B in sales. Alibaba alone recorded sales of over $38B, easily surpassing Amazon’s Prime Day record of ~$5.8B.

Market Indices Week of 11/15

S&P 5000.9%
Small Caps-0.2%
Intl. Developed-0.8%
Intl. Emerging-2.1%
Commodities-1.0%
U.S. Bond Market0.6%
10-Year Treas. Yield1.83%
US Dollar-0.4%
WTI Oil ($/bl)$58
Gold ($/oz)$1,469

The Week Ahead

  • Housing Starts
  • Existing Home Sales
  • Leading Indicators
  • Consumer Sentiment

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