U.S. stocks finished higher, adding to a strong weekly rebound that was fueled by eased concerns about the Fed potentially making a monetary policy mistake, even as the global markets eyed tomorrow’s highly-anticipated meeting at the G20 summit between the U.S. and China.
Treasury yields dipped and the U.S. dollar gained ground, while crude oil and gold prices slipped.
The Dow Jones Industrial Average rose 200 points (0.8%) to 25,538,
The S&P 500 Index gained 22 points (0.8%) to 2,760, and
The Nasdaq Composite increased 57 points (0.8%) to 7,331.
In heavy volume, 1.5 billion shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq.
WTI crude oil declined $0.52 to $50.93 per barrel and wholesale gasoline was off $0.03 at $1.40 per gallon. Elsewhere,
The Bloomberg gold spot price was down $2.35 to $1,221.85 per ounce, and
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.5% to 97.23.
Markets were solidly higher for the week, as the DJIA surged 5.2%, the S&P 500 Index jumped 4.8%, and the Nasdaq Composite rallied 5.6%.
Regional manufacturing growth accelerates much more than expected
The Chicago Purchasing Managers Index increased to 66.4 in November, from 58.4 in October, and versus expectations of 58.5. A reading above 50 denotes expansion. This was the highest level since December 2017, with growth in new orders, employment and order backlog all accelerating.
Treasuries were higher, with the yield on the 2-year note dipping 1 basis point to 2.80%, the yield on the 10-year note declining 3 bps to 3.00%, and the 30-year bond rate decreasing 2 bps to 3.30%.
Global markets mixed on data and as leaders gather for major summit
European equities finished mixed as the markets eyed the congregation of major world leaders for the G20 summit in Argentina. President Donald Trump and Chinese President Xi are slated to have dinner Saturday afternoon to address trade tensions, although U.S. officials noted earlier this week that the U.S. had resumed talks with China’s government “at all levels.”
Markets seemed to survey trade negotiations ahead of the summit for signs of progress or changes in either party’s leverage at the bargaining table. Italian deficit concerns seemed to lessen after Italy’s Prime Minister told a local newspaper that he is working on a proposal to reduce the planned deficit target for 2019.
The British pound and the euro were lower versus the U.S. dollar as Brexit anxieties festered, while economic data in the region was a bit on the disappointing side. German retail sales unexpectedly declined, the Eurozone unemployment rate came in above estimates, and Eurozone core consumer price inflation was cooler than anticipated. Bond yields in the region were mostly lower, though Italian rates ticked higher.
Japanese markets traded higher following a preliminary read on the nation’s industrial production, though the yen did nudge higher. Chinese markets gained ground even as the country’s official Manufacturing and Services PMI Indexes both showed slower paces of growth for November, with the former’s new export orders contracting for the sixth-straight month. South Korean markets moved lower in the wake of the Bank of Korea’s expected rate hike.
Stocks rally after back-to-back weekly drops
Coming off two-straight weekly drops, U.S. stocks battled back, courtesy of a three-day rally to begin the week that culminated with a sharp surge on Wednesday. Consumer discretionary issues led a broad-based advance with data suggesting the U.S. consumer kicked off the holiday shopping season on Black Friday and Cyber Monday in strong fashion to get the ball rolling. Hopes of some sort of breakthrough on the U.S./China trade front at this weekend’s highly-anticipated meeting at the G20 summit—despite mixed headlines—also appeared to aid sentiment.
Looking back, the largest catalyst came from eased worries that the Fed was on the verge of making a monetary policy mistake by continuing its pace of rate hikes despite growing global turbulence. Federal Reserve Chairman Jerome Powell delivered a speech, in which he walked back comments made in early October that proved to be a key source of the heightened volatility seen in the markets since Q4 began. Powell noted that interest rates remain “just below” neutral—neither speeding up nor slowing down growth—for the economy, contrasting his October comments that we were a “long way from neutral.”
The speech was followed by the release of the minutes from the Fed’s non-eventful November monetary policy meeting that showed the Central Bank was going to place a greater emphasis on being data dependent and that although another rate increase was likely “fairly soon,” its statement may need to be modified at coming meetings, particularly referring to its expectations for “further gradual increases.”
Next week looks to be setting up for more potential bouts of volatility as the final month of the year begins, with Saturday’s meeting between the U.S. and China likely coming under heavy scrutiny, along with Fed Chair Powell’s midweek testimony in front of the Joint Economic Committee of Congress.
International reports due out next week that could garner attention include: Australia—Reserve Bank of Australia monetary policy decision, Q3 GDP and trade balance. China—Caixin Manufacturing and Services PMIs. India—Reserve Bank of India monetary policy decision and Q3 GDP. Japan—Q3 capital spending, household spending and vehicle sales. Eurozone—Markit’s business activity reports, retail sales and Q3 GDP, along with German factory orders and industrial production. U.K.—Markit’s business activity reports, new car registrations and the Bank of England’s inflation forecasts.