Market Insights 11/6/2019

U.S. equities finished mixed, ending a streak of record highs for the Dow and Nasdaq, as the optimism surrounding progress in a “phase one” U.S.-China trade deal that has pushed markets higher was tempered by reports that a meeting between President Trump and Chinese President Xi may be delayed until December.

Treasury yields were lower, as was the U.S. dollar and crude oil prices, while gold gained ground.

The Markets…

The Dow Jones Industrial Average was nearly unchanged at 27,493

The S&P 500 Index inched 2 points (0.1%) higher to 3,077

The Nasdaq Composite lost 24 points (0.3%) to 8,411

In heavy volume, 980 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil declined $0.88 to $56.35 per barrel and wholesale gasoline was down $0.04 at $1.63 per gallon

The Bloomberg gold spot price rose $7.58 to $1,491.19 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.1% to 97.94

Q3 non-farm productivity surprisingly slips and costs rise more than expected, mortgage apps dip

Preliminary Q3 non-farm productivity declined 0.3% on an annualized basis, versus the Bloomberg expectation of a 0.9% gain, and following the upwardly-revised 2.5% increase seen in Q2. Labor productivity, or output per hour, is calculated by dividing real output by hours worked by all persons, including employees, proprietors, and unpaid family workers. During the quarter, output increased 2.1% and hours worked increased 2.4%.

This was the first decline in productivity since Q4 of 2015, with the Department of Labor noting that in Q3 2019, self-employed workers made an unusually large contribution to growth in hours worked. Productivity is a major contributor to the economy’s long-term health and prosperity.

The MBA Mortgage Application Index dipped 0.1% last week, following the prior week’s 0.6% gain. The slight decline came as a 1.8% rise for the Refinance Index was more than offset by a 2.5% decrease for the Purchase Index. The average 30-year mortgage rate fell 7 basis points to 3.98%.

Treasuries were higher, as the yield on the 2-year note was down 2 bps to 1.60%, the yield on the 10-year note decreased 4 bps to 1.82%, and the 30-year bond rate declined 5 bps to 2.30%.

Tomorrow’s economic calendar will also be light, offering weekly initial jobless claims, forecasted to have decreased 3,000 to 215,000, while in the final hour of trading, consumer credit will be released, with economists projecting that consumer borrowing shrank to $15.0 billion during September from the $17.9 billion posted in August.

Europe mixed as earnings and economic data pour in

European equities were mixed, as the markets continued to eye developments on the U.S.-China trade front, which has increased optimism regarding a potential “phase one” deal, and has boosted the global markets and helped push U.S. equities back into record high territory. Earnings and economic data was also in focus, with today’s disappointing U.S. productivity report countering some upbeat data on this side of the pond.

Eurozone retail sales unexpectedly ticked higher in September and the region’s services sector growth was revised to a slightly faster pace for last month. The euro dipped versus the U.S. dollar and the British pound was lower ahead of tomorrow’s monetary policy decision by the Bank of England. Bond yields in the region were mostly lower.

The U.K. FTSE 100 Index ticked 0.1% higher, France’s CAC-40 Index rose 0.3%, Germany’s DAX Index was up 0.2% and Switzerland’s Swiss Market Index gained 0.4%, while Italy’s FTSE MIB Index was little changed and Spain’s IBEX 35 Index declined 0.1%.

Stocks in Asia finished mixed following the recent run in the global equity markets, which has seen U.S. stocks rally back to all-time highs, bolstered by optimism the U.S. and China look to be heading toward a “phase one” trade agreement. Japan’s Nikkei 225 Index rose 0.2%, with gains likely limited by the yen regaining some of the recent drop that has come with the U.S. dollar’s recent rise and a report that showed the nation’s services sector output fell to a level depicting contraction for last month.

China’s Shanghai Composite Index declined 0.4% and the Hong Kong Hang Seng Index finished little changed, after the People’s Bank of China set the midpoint for the yuan at the strongest since August 8th.