Market Insights 1/8/2019

U.S. stocks extended a recent rebound and are on track for a third-straight weekly gain, courtesy of continued trade optimism and an apparent carry over of support from recent dovish Fed commentary.

Stocks shrugged off an earnings warning from Samsung, disappointing Eurozone economic data and the continued partial government shutdown.

Gold declined, while Treasury yields, the U.S. dollar and crude oil prices moved higher.

The Markets…

The Dow Jones Industrial Average rose 256 points (1.1%) to 23,787

The S&P 500 Index added 25 points (1.0%) to 2,574

The Nasdaq Composite increased 74 points (1.1%) to 6,897

In moderately heavy volume, 1.0 billion shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil rose $1.26 to $49.78 per barrel and wholesale gasoline was $0.02 higher at $1.36 per gallon

The Bloomberg gold spot price declined $3.75 to $1,285.46 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.3% to 95.93

Job openings, small business optimism fall

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, fell to 6.89 million jobs available to be filled in November from October’s upwardly-adjusted 7.13 million, and versus the Bloomberg forecasted of 7.05 million. The hiring rate ticked lower to 3.8% from October’s 4.0% pace, and the separation rate dipped to 3.7%, from October’s 3.8% level.

Treasuries were lower, with the yield on the 2-year note gaining 4 basis points to 2.58%, the yield on the 10-year note rising 3 bps to 2.72%, and the 30-year bond rate ticking 1 bp higher to 3.00%.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for December declined to 104.4, from the prior month’s unrevised 104.8 level, and versus expectations of a dip to 103.0. Trade balance data is postponed due to the government shutdown.

Europe higher, Asia mixed, as trade and tech earnings command attention

European equities finished broadly higher amid relative trade optimism as the first face-to-face trade talks since President Trump and Chinese President Xi Jinping agreed to a 90-day truce continued and reports suggested progress is being made and the discussions could extend to a third day.

The markets showed some resiliency in the face of an unexpected drop in German industrial production, which followed yesterday’s factory orders miss, as well as softer-than-expected Eurozone economic and business activity sentiment reports. Investors also continued to focus on the pace of Fed monetary policy normalization as some key inflation data and another speech from Fed Chairman Jerome Powell will end the week. Brexit political worries continued to fester around whether the U.K. would request an extension of Article 50—delaying the late-March timeline for the U.K. to cease being a member of the European Union.

The euro and British pound were lower versus the U.S. dollar, while bond yields in the region were mostly higher.

Asian stocks finished mixed amid lingering optimism of a development in the trade conflict between the world’s two largest economies and anticipation of the upcoming earnings season. Japanese markets gained ground with the yen paring a recent rally and the auto sector showing strength.

Mainland Chinese stocks dipped and Hong Kong markets nudged higher as markets awaited news from the second day of vice-ministerial level trade meetings between the U.S. and China. The trade talks come ahead of the expiration of a 90-day truce on further tariffs between the two countries.

South Korean equities were hampered by some disappointing earnings reports in the tech sector, while Australian stocks rose amid the recent rebound in the global markets and Indian markets advanced after late yesterday’s 2019 GDP estimate showed growth should accelerate.