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  • December 2, 2019

Week in Review

Week Ending: Friday, November 29, 2019

Recap & Commentary

Markets ended the holiday-shortened week higher with the S&P 500 setting three new record highs. A number of merger and acquisition announcements, along with the absence of any bad news regarding trade talks, boosted markets.

With the arrival of Black Friday, the holiday shopping season has officially begun. Early indications are that an increasing number of consumers are happy to skip crowded malls for the ease and comfort of online shopping. According to preliminary data from industry group ShopperTrak, Black Friday sales at brick-and-mortar stores fell -6.2%, while online sales increased ~20% from 2018 to a record $7.4B. The next opportunity to measures consumers’ desire to spend will be Cyber Monday. For the entire holiday shopping season, the National Retail Federation is currently forecasting holiday sales to increase to between $728B and $731B, a 3.8-4.2% increase from 2018. While the holiday shopping season is important for all retailers, it is particularly important for department stores and specialty retailers. According to Barron’s, Nordstrom, Kohl’s and Williams-Sonoma make more than 40% of their annual earnings in the fourth quarter, and Macy’s earns a full 70% of its annual profits in the fourth quarter.

Economic Bullet Points

GDP—Q3 real GDP growth was revised up to a 2.1% annual rate from 1.9% in the advance estimate, above the consensus of 1.9%. It reflected upward revisions to inventories and capex that were partly offset by downward revisions to net exports and government spending. On a y/y basis, real GDP was also up 2.1%, notably slower than the peak 3.2% rate in Q2 2018. The moderation reflects a number of factors, including the global slowdown, trade tensions, and the wearing off of the tax cut stimulus.

Case-Shiller Home Price Index rose 0.4% in September, while its y/y change moved up to 3.2% from 3.1%. The uptick reflects firmer Q3 housing demand.
New Home Sales fell 0.7% in October, but sales for the prior month were revised significantly higher and are now running at their most robust three-month pace of this expansion.

Durable Goods Orders surprised to the upside in October, increasing 0.6%. Core capital goods orders jumped 1.2% and suggest equipment spending could rebound in Q4. The trend in spending, however, remains lackluster.

Personal Income and Outlays— Personal Income was unchanged in October, below the consensus of +0.3%, while disposable personal income edged down 0.1%, its first decline since November 2015. But Real personal consumption expenditures rose nonetheless, up 0.1%, as consumers cut back on goods spending. The personal saving rate ticked down to 7.8% from 8.1% but remains consistent with continued moderate economic growth.

Consumer Confidence slipped to 125.5 in November. While this marks the fourth consecutive monthly decline, the level is still high enough to suggest moderation in the pace of PCE growth rather than an outright decline.

Of Note

Year-to-date, nearly 1,100 ETFs have been closed, compared to slightly less than 1,000 for all of 2018. Many of the closed ETFs held very few assets, charged higher fees, and tracked small niche industries such as fishing.

Market Indices Week of 11/29

S&P 5001.0%
Small Caps2.2%
Intl. Developed0.5%
Intl. Emerging-0.8%
Commodities-2.0%
U.S. Bond Market0.1%
10-Year Treas. Yield1.77%
US Dollar0.0%
WTI Oil ($/bl)$55
Gold ($/oz)$1,463

The Week Ahead

  • Nov. Employment Report
  • Factory Orders
  • ISM Manufacturing
  • ISM Services
  • Trade Balance
  • Consumer Sentiment

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