Monthly Archives: November 2019

Market Insights 11/29/2019

U.S. stocks declined today but posted another solid weekly advance, which was the seventh out of eight.

Lingering optimism of a U.S.-China “phase one” trade deal, which was a main catalyst for this week’s rally, was challenged somewhat by the U.S. signing legislation in support of Hong Kong protestor’s.

Treasury yields were mixed and gold was higher, while the U.S. dollar turned lower and crude oil prices fell, with the economic calendar dormant and equity news light.

The Markets…

The Dow Jones Industrial Average declined 113 points (0.4%) to 28,051

The S&P 500 Index decreased 13 points (0.4%) to 3,141

The Nasdaq Composite slid 40 points (0.5%) to 8,665

In light volume, 496 million shares were traded on the NYSE and 1.1 billion shares changed hands on the Nasdaq

WTI crude oil lost $2.52 to $55.59 per barrel and wholesale gasoline shed $0.08 to $1.60 per gallon

The Bloomberg gold spot price was $9.03 higher at $1,464.63 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—dipped 0.1% to 98.25

Markets got back into the green for the week, as the DJIA rose 0.6%, the S&P 500 Index advanced 1.0%, and the Nasdaq Composite gained 1.7%

Treasury yields mixed and economic calendar dormant in a half day for the markets

Treasuries finished mixed as the economic calendar was void of any major releases today, with the yield on the 2-year note declining 2 basis points to 1.60%, though the yields on the 10-year note and the 30-year bond ticked 1 bp higher to 1.77% and 2.20%, respectively.

Next week, when the markets return to full strength, the economic calendar will remain in high gear, with key reports that could garner attention being: ISM and Markit November manufacturing and non-manufacturing reports, jobless claims, factory orders and the preliminary December University of Michigan’s Consumer Sentiment Index.

However, with the health of the consumer keeping recession concerns in check, Friday’s November non-farm payroll report has the potential to be the biggest driver of market direction for the week, which will come days before the Fed’s final monetary policy decision of the year on December 11th.

Europe mostly lower on trade and data

European equities finished mostly lower, with the U.S. markets dipping in a return from a holiday break, while the euro and British pound reversed slightly higher versus the U.S. dollar.

Optimism of an agreement between the world’s two largest economies has driven the global equity markets higher recently, notably the string of all-time highs in the U.S. The economic calendar was relatively busy, with German retail sales surprisingly falling in October but the nation’s unemployment change for November unexpectedly declined.

The U.K. FTSE 100 Index was down 0.9%, Germany’s DAX Index, France’s CAC-40 Index and Spain’s IBEX 35 Index dipped 0.1%, Italy’s FTSE MIB Index declined 0.4%, and Switzerland’s Swiss Market Index decreased 0.3%.

Asia lower following data and as trade tensions flare-up

Stocks in Asia finished lower, with the markets digesting some soft economic data out of Japan and as U.S.-China trade tensions appear to be flaring up. Following a larger-than-expected drop in Japanese October retail sales reported late-Wednesday, the nation reported that its industrial production for last month dropped 1.7% m/m, much larger than the 0.3% dip that was anticipated.

The Hong Kong Hang Seng Index dropped 2.0% to lead the downside move, and China’s Shanghai Composite Index decreased 0.6%. Japan’s Nikkei 225 Index declined 0.5% following the data and as the yen briefly gained some ground late in the session. South Korea’s Kospi Index dropped 1.5%, while the Bank of Korea kept its benchmark interest rate unchanged. Australia’s S&P/ASX 200 Index traded 0.3% lower and India’s S&P BSE Sensex 30 Index moved 0.8% to the downside.

Market Insights 11/26/2019

U.S. stocks continued to rack up record highs, courtesy of lingering optimism of a “phase one” U.S.-China trade deal.

Consumer Confidence unexpectedly slipped and Richmond manufacturing output surprisingly slipped into contraction, though the trade deficit unexpectedly narrowed and new home sales topped forecasts.

Treasury yields and the U.S. dollar dipped. Gold and crude oil prices rose. Asia finished mixed and Europe traded higher.

The Markets…

The Dow Jones Industrial Average rose 55 points (0.2%) to 28,122

The S&P 500 Index gained 7 points (0.2%) to 3,141

The Nasdaq Composite advanced 15 points (0.2%) to 8,648

In moderately-heavy volume, 1.6 billion shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil increased $0.40 to $58.41 per barrel and wholesale gasoline was up $0.03 at $1.70 per gallon

The Bloomberg gold spot price was $7.13 higher at $1,462.46 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—dipped 0.1% to 98.24

Consumer Confidence unexpectedly slips to headline heavy economic docket

The Conference Board’s Consumer Confidence Index surprisingly fell to 125.5 in November, from October’s upwardly-revised 126.1 level, versus the Bloomberg estimate of a rise to 127.0. The index sits at the lowest level since June as the Present Situation Index dropped, more than offsetting an improvement for the Expectations Index of business conditions for the next six months.

New home sales declined 0.7% month-over-month in October to an annual rate of 733,000 units, but September’s figure was upwardly-revised to a 738,000 unit pace and the level easily topped the 705,000 unit forecast. The median home price was down 3.5% y/y at $316,700. New home inventory ticked higher to a 5.3 months of supply at the current sales pace from 5.2 months in September.

Treasuries rose, with the yields on the 2-year and 10-year notes declining 2 basis points to 1.58% and 1.74%, respectively, while the 30-year bond rate decreased 3 bps to 2.17%.

The rest of the week’s worth of data will be condensed into tomorrow’s fully-loaded economic calendar ahead of the Thanksgiving holiday break. Weekly mortgage applications and jobless claims, pending home sales, the Chicago PMI and first revision (two) to Q3 GDP are all on the docket.

Europe mostly higher as global markets eye data and U.S.-China trade

European equities finished mostly higher, following a relatively upbeat December read on German consumer sentiment and with the global markets focusing on U.S.-China trade talks to see if a “phase one” deal looks likely as a December 15th deadline looms for the implementation of further tariffs on Chinese goods. Optimism of an agreement has been a main catalyst to the global stock market rise as of late and the string of record highs in the U.S and abroad.

The U.K. FTSE 100 Index, France’s CAC-40 Index and Spain’s IBEX 35 Index ticked 0.1% higher, Italy’s FTSE MIB Index advanced 0.3%, and Switzerland’s Swiss Market Index traded 0.4% to the upside, but Germany’s DAX Index dipped 0.1%.

Stocks in Asia finished mixed on the heels of yesterday’s global advance that saw the U.S. markets register a fresh round of record highs. U.S.-China trade remains a key focus for the markets as headlines suggest the two sides continue to talk ahead of the December 15th deadline for further implementation of tariffs on Chinese goods. Optimism appears to remain intact regarding a “phase one” agreement between the two largest economies, bolstered by China saying yesterday that it will raise penalties on violations of intellectual property rights, which is a key contention point pertaining to a comprehensive trade agreement.

China’s Shanghai Composite Index finished flat and the Hong Kong Hang Seng Index dipped 0.3%, trimming some of yesterday’s rally that was fostered by district council elections in the region that resulted in a landslide victory for pro-democracy candidates as Hong Kong continues to deal with escalated unrest.

Japan’s Nikkei 225 Index rose 0.4%, with the yen slipping a bit, while South Korea’s Kospi Index dipped 0.1%. Australia’s S&P/ASX 200 Index advanced 0.8% and India’s S&P BSE Sensex 30 Index declined 0.2%.

Market Insights 11/25/2019

U.S. stocks registered another round of record highs, courtesy of improved U.S.-China trade sentiment.

Treasury yields and gold dipped, though the U.S. dollar and crude oil gained modest ground, as a flood of data is set to pour in ahead of this week’s holiday break.

Asia finished higher, led by Hong Kong after pro-democracy candidates pulled out a landslide victory in elections, while Europe traded to the upside.

The Markets…

The Dow Jones Industrial Average rose 191 points (0.7%) to 28,067

The S&P 500 Index gained 23 points (0.8%) to 3,134

The Nasdaq Composite advanced 113 points (1.3%) to 8,632

In moderate volume, 815 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil increased $0.24 to $58.01 per barrel and wholesale gasoline was little changed at $1.67 per gallon

The Bloomberg gold spot price was $6.53 lower at $1,455.07 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 98.32

Regional manufacturing report improves more than expected to kick off holiday-shortened week

The November Dallas Fed Manufacturing Index improved by a larger amount than expected but remained at a level depicting contraction (a reading below zero), rising to -1.3 from -5.1 in October, and versus the Bloomberg expectation of an increase to -3.8.

Treasuries ticked higher, with the yields on the 2-year and 10-year notes dipping 1 basis point to 1.62% and 1.76%, respectively, while the 30-year bond rate declined 2 bps to 2.20%.

Europe higher to begin the week

European equities traded higher, with China’s announcement that it will raise penalties on violations of intellectual property rights—which is a major sticking point pertaining to a comprehensive trade agreement—appearing to keep the possibility of a “phase one” U.S.-China trade deal in play. The markets also eyed elections in Hong Kong that showed pro-democracy candidates post a landslide victory as the region contends with escalated unrest. The euro dipped versus the U.S. dollar but the British pound traded higher, while bond yields in the region were mixed.

The U.K. FTSE 100 Index and Switzerland’s Swiss Market Index were up 1.0%, Germany’s DAX Index advanced 0.6%, France’s CAC-40 Index gained 0.5%, Italy’s FTSE MIB Index rose 0.8%, and Spain’s IBEX 35 Index increased 0.7%.

The Hong Kong markets led the way, with the Hang Seng Index rallying 1.5% on the heels of district council elections that resulted in a landslide victory for pro-democracy candidates as the region continues to deal with escalated unrest. China’s Shanghai Composite Index advanced 0.7%. Japan’s Nikkei 225 Index gained 0.8%, with the yen slipping a bit, while South Korea’s Kospi Index moved 1.0% to the upside. Australia’s S&P/ASX 200 Index increased 0.3% and India’s S&P BSE Sensex 30 Index rose 1.3%.

Market Insights 11/22/2019

The U.S. equity markets finished the last trading session of the week modestly higher, but failed to post gains for a seventh-straight week, as the omnipresent uncertainty swirling around a U.S.-China “phase one” trade deal that has hampered conviction all week.

Treasury yields were nearly unchanged and the U.S. dollar was higher, while crude oil and gold prices fell.

The Markets…

The Dow Jones Industrial Average rose 109 points (0.4%) to 27,876

The S&P 500 Index increased 7 points (0.2%) to 3,110

The Nasdaq Composite advanced 14 points (0.2%) to 8,520

In light volume, 717 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.81 to $57.77 per barrel and wholesale gasoline shed $0.03 to $1.67 per gallon

The Bloomberg gold spot price was $1.74 lower at $1,462.67 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.3% to 98.26

Markets were lower for the week, snapping a six-week winning streak, as the DJIA declined 0.5%, while the S&P 500 Index and the Nasdaq Composite decreased 0.3%

Business activity and consumer sentiment reports top estimates

The preliminary Markit U.S. Manufacturing PMI Index for November rose to 52.2 from October’s unrevised 51.3 figure, and versus the Bloomberg expectation of an increase to 51.4. The preliminary Markit U.S. Services PMI Index showed growth accelerated more than expected for the key U.S. sector this month, rising to 51.6 from October’s 50.6 figure, above forecasts of 51.0. Readings above 50 for both indexes denote expansion.

The final November University of Michigan Consumer Sentiment Index was adjusted higher to 96.8, from the preliminary figure of 95.7, where it was expected it to remain. The index was also above October’s 95.5 level and continued to rebound from the near three-year low posted in August as both the current conditions and expectations components of the index were revised higher.

Treasuries were nearly flat, as the yields on the 2-year and 10-year notes were unchanged at 1.61% and 1.77%, respectively, while the 30-year bond rate ticked 1 basis point lower to 2.22%.

Europe higher following business activity reports and continued focus on trade

European equities finished out the week higher, as the euro and British pound lost ground versus the U.S. dollar and bond yields came under pressure. The markets digested a host of manufacturing and services sector reports for this month. The U.S.-China trade front remained a focus, with mixed headlines keeping uncertainty high, and European Central Bank President Christine Lagarde delivered her first speech, in which she pointed out the importance of fiscal policy in fixing the region’s challenges.

The U.K. FTSE 100 Index rallied 1.2%, Germany’s DAX Index and France’s CAC-40 Index rose 0.2%, Spain’s IBEX 35 Index increased 0.4%, and Switzerland’s Swiss Market Index advanced 0.3%, while Italy’s FTSE MIB Index was little changed.

Stocks in Asia finished mixed, with the markets focusing on a host of manufacturing and services sector data set for throughout the day, while uncertainty regarding a U.S.-China “phase one” deal remained, with Chinese President Xi saying the nation wants to work out an initial trade agreement but it is not afraid to retaliate when necessary.

China’s Shanghai Composite Index declined 0.6% and the Hong Kong Hang Seng Index rose 0.5%. Australia’s S&P/ASX 200 Index gained 0.6% and South Korea’s Kospi Index moved 0.3% higher, though India’s S&P BSE Sensex 30 Index decreased 0.5%.

Stocks snap string of weekly gains

U.S. stocks retreated modestly from all-time highs for the major indices, with the S&P 500 Index snapping a string of six-straight weekly gains as mixed headlines caused uncertainty of a U.S.-China “phase one” trade deal to resurface and stymie market conviction. Q3 earnings season also limped to the finish line, with mixed results as Target Corporation and Lowe’s highlighted the calendar, but Dow member Home Depot, Macy’s and Kohl’s disappointed the Street.

Per data compiled by Bloomberg, out of the 476 S&P 500 companies that have reported thus far, nearly 58% have topped revenue forecasts and about 79% have exceeded earnings estimates. The health care sector remains a standout in Q3, on track to post double-digit revenue growth and over an 8% rise in profits.

The economic calendar continued to paint a mixed picture, with Friday’s upbeat consumer sentiment and business activity reports being complemented by a jump in the Philly Fed Manufacturing Index, a third monthly rise in four in existing home sales and a high in building permits not seen since 2007. The U.S. dollar and gold rose on the week, while the Treasury yield curve flattened and crude oil prices were little changed.

The health care sector continued to outperform, but tech, consumer discretionary, industrials, real estate and materials stocks all came under pressure to pace the week’s pullback in the equity markets.

Next week, the economic calendar will remain robust but be condensed due to the Thanksgiving holiday, which will see the U.S. markets close on Thursday and have a half-day on Friday. Leading up to the holiday break, we will get key reads on new home sales, Consumer Confidence, the second reading (of three) of Q3 GDP, preliminary durable goods orders, jobless claims, the Chicago PMI, personal income and spending, and the Fed’s Beige Book. The week will also begin with a Monday evening speech from Federal Reserve Chairman Jerome Powell.

Market Insights 11/21/2019

U.S. equities finished with modest losses in today’s session, as the potential of a U.S.-China “phase one” trade agreement continued to be the focus.

Treasury yields were higher, along with crude oil prices, while gold was lower and the U.S. dollar gained modest ground.

The Markets…

The Dow Jones Industrial Average lost 55 points (0.2%) to 27,766

The S&P 500 Index declined 5 points (0.2%) to 3,104

The Nasdaq Composite fell 21 points (0.2%) to 8,506

In moderate volume, 826 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil rose $1.57 to $58.58 per barrel and wholesale gasoline gained $0.04 to $1.70 per gallon

The Bloomberg gold spot price was $6.95 lower at $1,464.66 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 98.00

Leading Indicators slip again, existing home sales rise, regional manufacturing jumps

The Conference Board’s Index of Leading Economic Indicators (LEI) for October dipped 0.1% month-over-month matching the Bloomberg projection, and compared to September’s revised 0.2% decline. This was the third-straight weekly decline as a positive contribution from building permits was more than offset by negative reads for ISM new orders and average workweek. Consumer orders, capital goods orders, jobless claims, stock prices, credit, the yield curve and consumer expectations components were little changed.

Existing-home sales rose 1.9% m/m in October to an annual rate of 5.46 million units, compared to expectations of a rise to 5.49 million units from September’s revised 5.36 million rate. Sales of single-family homes were down m/m but up versus year-ago levels, while purchases of condominiums and co-ops were roughly flat m/m and below year ago levels.

The median existing-home price rose 6.2% from a year ago to $270,900, marking the 92st straight month of y/y gains. Unsold inventory came in at a 3.9-months pace at the current sales rate, down from 4.3 months a year ago.

Sales increased for the third month in four as activity rose m/m in the Midwest and South m/m, but declined in the Northeast and in the West. Sales were higher y/y in all four regions. National Association of Realtors Chief Economist Lawrence Yun said, “Historically-low interest rates, continuing job expansion, higher weekly earnings and low mortgage rates are undoubtedly contributing to these higher numbers.”

Weekly initial jobless claims were unchanged week-over-week at 227,000, versus the Bloomberg estimate of 218,000, with the prior week’s figure being revised higher by 2,000. The four-week moving average rose by 3,500 to 221,000, while continuing claims increased by 3,000 to 1,695,000, north of estimates of 1,683,000.

Treasuries were lower, as the yields on the 2-year and 10-year notes, along with the 30-year bond, were up 4 basis points at 1.61%, 1.77% and 2.23%, respectively.

Europe lower as U.S.-China trade deal optimism continues to fade

European equities finished lower, with the euro and the British pound losing ground versus the U.S. dollar and bond yields in the region higher. U.S.-China trade focus remained, as optimism of a “phase one” agreement, which has bolstered the global markets as of late, continued to fade following yesterday’s reports that a deal may be delayed into 2020. The U.S. passing of a bill in the Senate supporting Hong Kong protestor’s seemed to also throw another wrinkle into the outlook for an imminent deal.

The U.K. FTSE 100 Index fell 0.3%, Germany’s DAX Index and France’s CAC-40 Index declined 0.2%, Italy’s FTSE MIB Index was down 0.3%, Spain’s IBEX 35 Index lost 0.1%, and Switzerland’s Swiss Market Index decreased 0.5%.

Stocks in Asia finished lower as uncertainty regarding a “phase one” U.S.-China trade deal continued to ramp-up amid reports yesterday that a deal may not be delivered by year end, while the recent passing of a bill by the U.S. Senate supporting protesters in Hong Kong as unrest in the region intensifies has exacerbated the uncertainty. Optimism of a deal had fostered a rally in the global markets and boosted U.S. equities to all-time highs.

Japan’s Nikkei 225 Index declined 0.5%, with the yen choppy, and the chip sector giving back some of a recent run on the trade uncertainty, which also weighed on South Korean stocks, with the Kospi Index falling 1.4%. China’s Shanghai Composite Index declined 0.3% and the Hong Kong Hang Seng Index dropped 1.6%. Australia’s S&P/ASX 200 Index decreased 0.7% and India’s S&P BSE Sensex 30 Index traded 0.2% to the downside.

Market Insights 11/20/2019

U.S. stocks finished lower, as the continued uncertainty surrounding a U.S.-China “phase one” trade deal lingered to hamper sentiment.

Treasury yields were lower and the U.S. dollar was higher, with mortgage applications declining and the minutes from the Fed’s October monetary policy meeting that delivered a third rate cut of the year solidifying the Fed’s move to pause future rate actions.

Gold was little changed and crude oil prices were higher after yesterday’s tumble.

The Markets…

The Dow Jones Industrial Average lost 113 points (0.4%) to 27,821

The S&P 500 Index declined 12 points (0.4%) to 3,108

The Nasdaq Composite fell 44 points (0.5%) to 8,527

In heavy volume, 1.0 billion shares were traded on the NYSE and 2.5 billion shares changed hands on the Nasdaq

WTI crude oil rose $1.66 to $57.01 per barrel and wholesale gasoline gained $0.06 to $1.66 per gallon

The Bloomberg gold spot price inched $0.18 lower to $1,472.28 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 97.91

Mortgage applications decline, Fed meeting minutes solidify pause

The MBA Mortgage Application Index declined 2.2% last week, following the prior week’s 9.6% jump. The decrease came as a 7.7% drop in the Refinance Index more than offset a 6.7% gain for the Purchase Index. The average 30-year mortgage rate fell 4 basis points to 3.99%.

In afternoon action, the Federal Reserve released the minutes from its October monetary policy meeting, after which the Central Bank announced a third rate cut of the year but signaled a pause and raised the bar for inflation in regard to when it would consider deploying a rate hike campaign. At the meeting, Committee Members saw the rate cut as adequate “to support the outlook of moderate growth, a strong labor market, and inflation near the Committee’s symmetric 2 percent objective,” and that the stance of the policy “likely would remain” steady “as long as incoming information about the economy did not result in a material reassessment of the economic outlook.”

Treasuries were higher, as the yield on the 2-year note declined 2 bps to 1.58%, while the yields on the 10-year note and 30-year bond dropped 6 bps to 1.73% and 2.20%, respectively.

Tomorrow, the economic calendar will hold weekly initial jobless claims, expected to have declined by 7,000 to 218,000, as well as the Index of Leading Economic Indicators (LEI), with economists projecting a 0.2% month-over-month fall for October, followed by existing home sales, forecasted to have rebounded to a 2.0% m/m gain at an annual rate of 5.49 million units during October from September’s 2.2% fall to an annual pace of 5.38 million units.

Europe mixed amid flared-up trade concerns

European equities were mixed, as the recent increase in optimism surrounding a U.S.-China “phase one” trade deal that has boosted the global stock markets and fostered a slew of record highs in the U.S. was tempered somewhat.

The resurfaced trade uncertainty came courtesy of U.S. President Donald Trump’s threat of increased tariffs on Chinese goods if a deal is not reached, and was further complicated by the U.S. Senate passing a bill supporting protesters in Hong Kong. The euro and British pound traded lower versus the U.S. dollar, while bond yields in the region were mixed.

The U.K. FTSE 100 Index dropped 0.8%, Germany’s DAX Index was down 0.5%, France’s CAC-40 Index declined 0.3%, and Spain’s IBEX 35 Index decreased 0.4%, while Switzerland’s Swiss Market Index was up 0.2% and Italy’s FTSE MIB Index gained 0.1%.

Stocks in Asia finished mostly to the downside with optimism of a U.S.-China “phase one” trade deal, which has boosted the global markets and led to a string of record highs in the U.S., continuing to fade. Also, the prospect for a trade deal was further complicated by the U.S. Senate passing legislation supporting Hong Kong protester’s as unrest has escalated as of late.

China’s Shanghai Composite Index and the Hong Kong Hang Seng Index both declined 0.8%. The markets appeared to shrug off further Chinese stimulus measures after the country lowered its 1-year loan prime rate for November. Japan’s Nikkei 225 Index traded 0.6% lower, with the yen gaining some ground, and following a report that showed the nation’s exports in October fell more than expected. South Korea’s Kospi Index fell 1.3% and Australia’s S&P/ASX 200 Index dropped 1.4%, with the banking sector seeing some pressure. However, a solid advance in telecommunications stocks lifted India’s S&P BSE Sensex 30 Index 0.5% higher.

Random Thoughts

Stocks were dealt a double dose of disappointment this week, as investors marked down many high-profile retailers following Q3 earnings and forward guidance disappointments.

At one point today, the S&P 500 fell nearly 1%, surrendering 5 of the 10 most recent new highs in the process, after Reuters reported that the Phase One trade accord between the U.S. and China might be delayed until next year.

This possibility increases investors’ already elevated skepticism of DC-initiated communications that boast of impending success. However, the resulting digestion of recent stock market gains should be viewed as a healthy reset of elevated valuations, allowing for the eventual resumption of the upward trend.

Indeed, following 20%+ YTD price gains through October since WWII, the S&P 500 rose an average 6% over the final two months of the year, logging a two-month advance 10 out of 10 times.

Market Insights 11/19/2019

U.S. stocks finished mixed, as optimism on the possibility of a U.S.-China “phase one” trade deal waned a bit due to uncertainty regarding whether if the U.S. is willing to roll back tariffs to close the deal.

Treasury yields and crude oil prices were lower, while the U.S. dollar was flat and gold finished with a modest gain.

The Markets…

The Dow Jones Industrial Average (DJIA) lost 102 points (0.4%) to 27,934

The S&P 500 Index ticked 2 points (0.1%) lower to 3,120

The Nasdaq Composite advanced 21 points (0.2%) to 8,571

In moderate volume, 837 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil tumbled $1.79 to $55.35 per barrel and wholesale gasoline shed $0.02 to $1.60 per gallon

The Bloomberg gold spot price was $0.56 higher at $1,472.07 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 97.79

Housing construction activity increases, building permits jump to 12-year high

Housing starts for October rose 3.8% month-over-month to an annual pace of 1,314,000 units, just shy of the Bloomberg forecast of 1,320,000 units. September starts were revised higher to an annual pace of 1,266,000. Construction was solidly higher for single-unit homes and multi-unit structures. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, jumped 5.0% m/m to an annual rate of 1,461,000, versus expectations of a 1,385,000 pace, and compared to September’s upwardly-revised 1,391,000 rate.

Treasuries were higher, as the yield on the 2-year note was little changed at 1.59%, while the yield on the 10-year note declined 2 basis points (bps) to 1.79% and the 30-year bond rate decreased 5 bps to 2.25%.

Tomorrow’s economic calendar will offer MBA Mortgage Applications, while later in the day the Federal Reserve will release the minutes from its last monetary policy meeting that concluded on October 30 with a third cut to its target for the fed funds rate this year.

Europe mixed as trade optimism fades, autos recover

European equities finished mixed in the face of fading optimism of a U.S.-China “phase one” trade deal, as reports have suggested the U.S. is reluctant to roll back Chinese tariffs, which has been a major point of contention in the negotiations. However, the auto sector, which has been hampered by slowing demand and production, rebounded to help foster some resiliency, aided by a report that showed new car registrations in the region rose solidly for the second-straight month in October.

The U.K. FTSE 100 Index rose 0.2%, Germany’s DAX Index was up 0.1%, and Switzerland’s Swiss Market Index gained 0.2%, while Spain’s IBEX 35 Index was little changed, Italy’s FTSE MIB Index declined 0.6%, and France’s CAC-40 Index decreased 0.4%.

Stocks in Asia finished mixed with the recently increased optimism regarding a “phase one” U.S.-China trade deal, which has been a major catalyst pushing the U.S. markets to record highs and sparking a rally in global equities, being dampened a bit. The uncertainty has resurfaced amid mixed headlines with the key point of contention being whether the U.S. will decide to roll back tariffs, which China has reportedly been pushing for.

China’s Shanghai Composite Index advanced 0.9% and the Hong Kong Hang Seng Index rallied 1.6%, despite escalated unrest in Hong Kong. Japan’s Nikkei 225 Index declined 0.5%, with the yen firming a bit, while South Korea’s Kospi Index decreased 0.3%. India’s S&P BSE Sensex 30 Index rose 0.5%, and Australia’s S&P/ASX 200 Index moved 0.7% higher, with the markets digesting the release of the minutes from the Reserve Bank of Australia’s (RBA) monetary policy meeting earlier this month that showed the RBA discussed the possibility of another rate cut.

Company and Earnings News…

Home Depot reported Q3 earnings-per-share of $2.53, above the $2.52 FactSet estimate, as revenues rose 3.5% year-over-year (y/y) to $27.2 billion, below the projected $27.5 billion. Q3 same-store sales grew 3.6% y/y, south of the estimated 4.7% increase, and its total transactions increased 1.5%. The world’s largest home improvement retailer noted that it saw broad-based growth across its business, yet sales were below expectations driven by the timing of certain benefits associated with its One Home Depot strategic investments.

Kohl’s Corporation posted Q3 EPS of $0.78, or $0.74 ex-items, below the projected $0.86, with revenues dipping 0.1% y/y to $4.6 billion, above the expected $4.4 billion. Q3 same-store sales increased 0.4% y/y, compared to the expected 0.9% gain. KSS lowered its full-year profit outlook, noting that it enters the holiday period with momentum and is strategically increasing its investments to take advantage of the unique opportunity to fuel growth and customer acquisition.

TJ Maxx announced Q3 earnings of $0.68 per share, topping the forecasted $0.66, as revenues grew 6.0% y/y to $10.5 billion, above the projected $10.3 billion. Q3 same-store sales increased 4.0% y/y, north of the estimated 2.3% gain. TJ Maxx raised its full-year EPS and same-store sales guidance, and although its Q4 outlook has midpoints that were south of the Street’s expectations, it added that the quarter, which includes the key holiday season, is off to a solid start.

Random Thoughts On Earnings

Investors had to contend with many conflicting issues last week, including slightly stronger-than-expected readings in consumer and producer price inflation, as well as retail sales, which were offset by a weaker-than-predicted read for industrial production and the start of the Presidential impeachment inquiry.

Yet all of this appeared to have been brushed aside when rumors spread of a soon-to-be-completed “phase one” trade deal between the U.S. and China.

The S&P 500 responded sharply by recording its ninth new all-time closing high since October 28, dragging the global benchmark with it, along with the growth, value and mid-caps indices. What’s more, seven of the S&P 1500’s 11 sectors gained on the week, though curiously led by the defensive groups.

While the broader market was hitting new price highs, S&P 500 EPS estimates for 2019 and 2020 continued to slip. Today, the S&P 500 is projected to earn $162.12 per share in 2019 versus the $171.93 estimated at the beginning of the year. EPS should rise to $176.88 by the end of 2020, even though earnings had been initially anticipated to come in at $191.23.

Finally, only one sector in the S&P 500 (consumer discretionary) saw an upward revision to its 2020 EPS estimate since September 30, along with fewer than 1/3rd of its sub-industries. Why the disconnect?

There is an old Wall Street adage that “prices lead fundamentals.” Though many strategists are likely scratching their heads wondering where are the green shoots hinting at a trend change in the EPS growth trajectory, the answer is most likely found in the expectations for a trade truce.

Until details of the deal are revealed, along with the prospects for continued conversations, EPS estimates are likely to undershoot potential.

Market Insights 11/15/2019

U.S. equities finished higher, achieving a sixth-straight week of gains, the first time since late 2017.

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

The Markets….

Trade uncertainty, which had resurfaced and has contributed to the lackluster action in the markets this week, however it was tempered somewhat after White House advisor Larry Kudlow offered upbeat comments regarding progress toward a “phase one” U.S.-China trade deal.

The Dow Jones Industrial Average rose 223 points (0.8%) to 28,005

The S&P 500 Index increased 24 points (0.8%) to 3,120

The Nasdaq Composite advanced 62 points (0.8%) to 8,540

In moderate volume, 845 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.95 to $57.72 per barrel and wholesale gasoline added $0.02 to $1.64 per gallon

The Bloomberg gold spot price was $4.59 lower at $1,466.81 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.2% to 98.00

Markets were higher for the sixth-straight week, as the DJIA gained 1.2%, the S&P 500 Index advanced 0.9% and the Nasdaq Composite increased 0.8%

Retail sales mixed, industrial production falls, regional manufacturing growth unexpectedly slows

Advance retail sales for October rose 0.3% month-over-month versus the Bloomberg forecast of a 0.2% increase, and September’s 0.3% decline was unrevised. Last month’s sales ex-autos gained 0.2% m/m, compared to expectations of a 0.4% gain and September’s unrevised 0.1% dip.

Treasuries were lower as the yield on the 2-year note was up 3 basis points at 1.61%, the yield on the 10-year note increased 2 bps to 1.84%, and the 30-year bond rate ticked 1 bp higher to 2.31%, respectively.

The Federal Reserve’s industrial production fell 0.8% month-over-month in October, doubling estimates of a 0.4% decrease, and September’s favorably-adjusted 0.3% decline. This was the third monthly decline out of four as utilities production fell solidly, while manufacturing and mining output also dropped, with the former continuing to be negatively affected by a large strike in the automotive industry.

Europe higher as trade remained in focus. Asia mostly higher on trade and data

European equities finished out the week higher, as the markets continued to eye U.S.-China trade developments after White House advisor Larry Kudlow offered some upbeat comments regarding the progress as the two sides were expected to hold phone discussions today.

In economic news, the Eurozone trade surplus narrowed more than expected in September and the region’s consumer price inflation for October was revised lower. The euro and British pound were higher versus the U.S. dollar, while bond yields in the region were mixed.

Stocks in Asia finished mostly to the upside, with the global markets continuing to monitor headlines regarding progress of a U.S.-China “phase one” trade deal, of which resurfacing uncertainty has stymied sentiment this week. White House economic adviser Larry Kudlow noted yesterday that a deal was getting close, though a Chinese Ministry of Commerce spokesperson was cited as saying the rolling back of tariffs is key to an agreement.

China’s Shanghai Composite Index declined 0.6% and the Hong Kong Hang Seng Index finished flat after a string of losses that have come from the escalated unrest in the province. Australia’s S&P/ASX 200 Index advanced 0.9% and India’s S&P BSE Sensex 30 Index nudged 0.2% higher ahead of some trade data as the markets were closing, which showed the decline in exports decelerated in October. Lastly, South Korea’s Kospi Index rose 1.1%.

Stocks extend weekly winning streak

U.S. stocks posted a sixth-straight week of gains for the first time since late 2017, with resurfaced trade uncertainty being tamped down late in the week by upbeat comments regarding progress on a “phase-one” U.S.-China trade deal from White House advisor Larry Kudlow.

Q3 earnings season continued down the home stretch and remained a buoy for the markets, with upbeat chip sector results continuing to pour in and Dow member Walmart topping earnings estimates and raising its full-year guidance heading into the key holiday shopping season, to more than offset a disappointing outlook from Dow component Cisco Systems. Thus far, of the 461 S&P 500 companies that have reported Q3 results, about 59% have topped revenue forecasts and roughly 79% have exceeded earnings estimates, per data compiled by Bloomberg.

Treasury yields and the U.S. dollar trimmed last week’s rallies, while gold and crude oil prices finished little changed. Real estate, communications services, information technology and healthcare stocks led the week’s gains, while the financials, consumer discretionary and energy sectors moved lower.

Next week, with earnings season creeping closer to the finish line, the economic calendar will likely dominate market attention, along with a persistent eye on the trade front. Housing will be in focus, courtesy of the releases of the NAHB Housing Market Index, housing starts and building permits, and existing home sales. We will get looks at the minutes from the Fed’s October 30th monetary policy meeting, the Leading Index, jobless claims, the Philly Fed Manufacturing Index, Markit’s preliminary November Manufacturing and Services PMIs, and the final University of Michigan Consumer Sentiment Index for November.