Monthly Archives: December 2019

Market Insights 12/31/2019

After spending most of the day in the red equities rose in the final minutes in the last day of 2019 to finish modestly higher, marking a positive end to a solid year for stocks that saw a number of record highs, courtesy of optimism on the trade front, eased recession worries, and a more accommodating monetary policy from the Fed.

Volume was subdued heading into tomorrow’s New Year’s holiday break, and as the U.S. bond markets traded in an abbreviated session, several global markets were shuttered ahead of the holiday and some traded in shortened sessions.

Treasury yields were higher, as was gold, but the U.S. dollar and crude oil prices were lower.

The Markets…

The Dow Jones Industrial Average rose 76 points (0.3%) to 28,538

The S&P 500 Index gained 10 points (0.3%) to 3,231

The Nasdaq Composite advanced 27 points (0.3%) to 8,973

In moderate volume, 810 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil declined $0.62 to $61.06 per barrel and wholesale gasoline was $0.03 lower at $1.69 per gallon

The Bloomberg gold spot price advanced $2.86 at $1,518.02 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—decreased 0.3% to 96.50

Markets were sharply higher for 2019, as the DJIA rose 22.3%, the S&P 500 Index increased 28.9%, and the Nasdaq Composite jumped 35.2%

Consumer Confidence unexpectedly dips, home prices top forecasts

The Conference Board’s Consumer Confidence Index declined to 126.5 in December, from November’s upwardly-revised 126.8 level, versus the Bloomberg estimate of a rise to 128.5.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index posted a 2.2% year-over-year gain in home prices in October, versus expectations of a 2.1% increase. Compared to the prior month, home prices were 0.4% higher on a seasonally adjusted basis, compared to forecasts of a 0.3% gain.

Treasuries were lower, as the yield on the 2-year note was up 1 basis point at 1.57%, the yield on the 10-year note increased 2 bps 1.92%, while the 30-year bond rate gained 4 bps 2.39%. Bond yields have continued to grind higher, with the U.S. and China reaching a “phase one” trade deal, the U.S. Mexico and Canada trade agreement (USMCA) receiving approval.

Please note: all U.S. markets will be closed tomorrow in observance of the New Year holiday.

Europe sees red to ring in the New Year, but action was muted ahead of the holiday

European equities traded lower, trimming 2019′s sharp gains that have been fueled by eased uncertainties regarding the global trade front, faded recession worries, and pledges from global central banks to maintain easy monetary policies. The euro and British pound moved higher versus the U.S dollar as the greenback continued to slide.

The U.K. FTSE 100 Index was down 0.6%, France’s CAC-40 Index dipped 0.1%, and Spain’s IBEX 35 Index fell 0.7%.

Stocks in Asia finished mixed in the final session of 2019, which has seen some solid gains in the global equity markets due to eased trade concerns as the U.S. and China are expected to sign a “phase one” deal early in 2020.

Volume was light as markets in Japan and South Korea were closed and South Korean and Australian markets closed early ahead of the New Year holiday.

China’s Shanghai Composite Index advanced 0.3%, Hong Kong’s Hang Seng Index declined 0.5%, with the region reporting that exports continued to drop in November but at a smaller pace than in October and compared to expectations. Australia’s S&P/ASX 200 Index fell 1.8%, amid a broad-based selloff led by the financial sector, and India’s S&P BSE Sensex 30 Index trimmed a double-digit advance for 2019, decreasing 0.7%.

More people did their shopping online this year

More people did their shopping online this year during one of the shortest holiday shopping seasons in years.

Retail sales in the U.S. rose 3.4% between Nov. 1 and Dec. 24 compared with last year, according to early data from Mastercard SpendingPulse. Mastercard SpendingPulse tracked spending online and in stores across all payment types, including those who paid by cash or check. Sales of automobiles are not included.

Online sales rose at a faster pace, up 18.8% from last year. Online shopping made up nearly 15% of total retail sales.

Faced with the shortest holiday shopping season since 2013, stores were trumpeting deals even before Halloween with hopes of getting people to think about Christmas.

Thanksgiving landed on Nov. 28 this year, the latest possible date it could fall. That meant six fewer days than last year, forcing last-minute shoppers to scramble. The Saturday before Christmas was the busiest shopping day in U.S. history, surpassing Black Friday, according to research firm Customer Growth Partners.

Amazon, which stepped up its one-day deliveries this year, said more people tried out its $119-a-year Prime membership this year than any other year, adding more than 5 million new customers in a single week. Members get faster shipping and other perks, like movie streaming.

Mastercard said overall clothing sales rose 1%. Jewelry sales increased 1.8%. Sales of electronics and appliances rose 4.6%. And furniture sales grew 1.3%.

Department stores, which have been hit hard by the rise of online shopping, still had trouble getting shoppers in their doors: total sales fell 1.8%, Mastercard said.

U.S. Market Weekly Summary – Week Ending 12/27/2019

S&P 500 Posts 0.6% Weekly Climb to Another Record Closing High, Led by Consumer Discretionary, Energy Stocks

The Standard & Poor’s 500 index rose 0.6% this week to another all-time closing high as an advance led by the consumer discretionary and energy sectors extended the stock market’s year-end rally to a fifth consecutive week.

The market benchmark ended Friday’s session at 3,240.02, up from last Friday’s closing level of 3,221.22, which had been a fresh record close at the time. This week’s advance came in only about 3.5 sessions as the market closed early on Tuesday for Christmas Eve and was closed all day Wednesday for Christmas Day.

The S&P 500 is now up 29% for the year through Friday with just two sessions remaining before 2019 is complete.

The consumer discretionary sector had the largest percentage gain of the week, up 1.5%, as reports of strong holiday sales had investors feeling positive about consumer stocks and, in turn, the economy.
The energy sector gained 0.6%. Other sectors that rose included technology, which had the second-largest gain, rising 1.1%, and materials, which was up 0.6%. Just one sector was in the red this week: utilities, which fell 0.4%.

The excitement about holiday sales came as online retailer Amazon said this holiday season was record-breaking for the company as well as independent third-party sellers. Amazon’s shares rose 4.7% this week. Adding to the exuberance, MasterCard said US retail sales excluding automobiles rose 3.4% year over year during the holiday season, led by e-commerce sales.

The consumer discretionary sector’s gainers also included Carnival. Shares of the cruise ship operator rose 2.3% this week following the company’s report last Friday of better-than-expected results for its fiscal Q4. With Carnival also saying bookings for the new year are running ahead of the prior year’s pace, analysts at firms including Wedbush, Deutsche Bank, SunTrust, Goldman Sachs, JPMorgan and Stifel Nicolaus boosted their price targets on Carnival’s stock this week.

Shares of other cruise operators also rose this week as Carnival’s encouraging results and guidance boosted sentiment across the category. Norwegian Cruise Line Holdings and Royal Caribbean Cruises also gained.
The energy sector’s climb came as crude oil futures rose this week. Gainers in the sector included Apache, whose shares jumped 16% after the company and French energy major Total on Sunday said they agreed to jointly explore and develop Block 58 offshore Suriname and each hold 50% working interest.

Market Insights 12/24/2019

U.S equities were little changed in an abbreviated trading session before the holiday. Volume was light, as is common on the day before Christmas.

The return to a calm Christmas Eve was welcomed after last year the day brought the worst plunge of the year; no such fireworks today.

Treasuries joined equities in mostly taking the day off, but did post modest gains. With little to spur momentum, the U.S. dollar was flat on the day.

International markets were a bit more mixed. Crude oil and gold rose.

The Markets…

The Dow Jones Industrial Average fell 36 points (0.1%) to 28,515

The S&P 500 fell 1 point to 3,223

The NASDAQ was up 7 points (0.1%) to 8,952

In light volume, 314 million shares were traded on the NYSE and 992 million shares changed hands on the NASDAQ

WTI oil added $0.46 to $60.98 per barrel and wholesale gasoline rose $0.02 to $1.72 per gallon

The Bloomberg gold spot price rose $15.60 to $1,504.30 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 97.67

Regional manufacturing slows further this month amid thin economic calendar

The Richmond Fed Manufacturing Activity Index for December unexpectedly fell further into contraction territory (a reading below zero), dropping to -5 versus forecasts calling for the figure to rise to 9 from November’s -1 level.

Treasuries were higher amid a light economic calendar, with the yield on the 2-year dropping 2 basis points to 1.63%, the 10 year yield shedding 3 bps to 1.75% and the 30-year bond rate dropping 2 bps to 2.38%.

With the week shortened by the Christmas Day holiday tomorrow and an early close of the U.S. markets today, the economic calendar is fairly light as a result. The only remaining reports for this week include weekly initial jobless claims and MBA Mortgage Applications on Thursday and Friday, respectively.

Please note: all U.S. stock markets will be closed tomorrow in observance of the Christmas Day holiday.

Global markets mixed in holiday-thinned trade

European markets that were open ahead of tomorrow’s Christmas holiday break traded in a tight range to finish mixed. Volume was light amid the closures, and as bourses in Germany, Switzerland, France, the U.K. and Italy all closed early in observance of the holiday. The euro was slightly higher versus the U.S. dollar and the British pound lost some ground, while bond yields in the region were flat.

The U.K. FTSE 100 Index was up 0.1% and Italy’s FTSE MIB Index was 0.5% higher, while France’s CAC-40 Index, Switzerland’s Swiss Market Index and Spain’s IBEX 35 Index were little changed, and Germany’s DAX Index fell 0.1%.

Stocks in Asia were mixed and also offered thin volume with shortened sessions in Australia and Hong Kong ahead of the Christmas holiday tomorrow. News that China will cut tariffs on over 850 products, including frozen pork, fruit and vegetable produce and certain types of semiconductors continued to support sentiment.

The Shanghai Composite Index rebounded from yesterday’s tumble to finish 0.7% higher, while the Hong Kong Hang Seng Index inched 0.2% lower and South Korea’s Kospi Index fell 0.6%. Japan’s Nikkei 225 Index was little changed amid some strength in the yen. Australia’s S&P/ASX 200 Index ticked 0.1% higher, and India’s S&P BSE Sensex 30 Index declined 0.4%.

Random Thoughts

Investors must feel as if they were extra good this year, since the S&P 500 and Barclays Aggregate bond index each posted above-average total returns, rising 31.2% and 8.5%, respectively, year to date through Dec. 23.

Since 1976, the S&P was higher in 82% of the years, while the Barclays Agg was up 93% of the time. Both indices posted positive annual results in 75% of all calendar years.

Using history as a guide, for it’s never gospel, years in which stocks and bonds each rose by more than their 43-year averages saw the S&P 500 gain an average 14.0% in the following year and advance in 82% of all years.

Happy Holidays From The Team at WT Wealth Management

Random Thoughts

The decade is almost at an end. Who would have thought that after suffering through a near 60% decline in the S&P 500 through early March 2009 – the worst bear market since the Great Depression – the bull would still be alive and kicking 10 years later?

Yet the S&P 500 recorded the 17th highest 10-year return in the past 100 years. Granted, investors dodged at least two fatal bear maulings in 2011 and 2018.

Since 12/31/2009, however, global issues rose nearly 100%, while large caps gained 189%, straddled by mid (+184%) and small-cap (+208%) benchmarks.

It was certainly a growth-oriented decade, as the S&P 500 Growth Index’s 234% surge bested the Value Index’s valiant 145% effort.

Along the way, 10 of 11 sectors posted advances, led by consumer discretionary, health care and technology. Communications services and materials lagged, while energy fell in price.

Finally, 93% of the S&P 1500’s 124 sub-industries that have been in existence for the entire period increased in price, led by application software, internet retail and managed health care.

Conversely, eight sub-industries endured double-digit declines, led by coal, diversified metals & mining and oil & gas drilling. What awaits investors in the coming decade? No one knows for sure, but on a sector level, history implies (but does not guarantee) that the best sectors in the prior decade will not repeat as leaders in the coming decade.

Indeed, the top three sectors from 1989 through 1999 went on to fall an average of nearly 28% in the 2000s, while the three worst sectors surged an average 46%. What’s more, the three top sectors in the 2000s gained an average of 80% in the 2010s, while the bottom three jumped 184%.

Market Insights 12/20/2019

U.S. stocks notched another record setting day, as the Santa Claus rally continues.

U.S. Treasury yields fell slightly, but the Dollar Index was higher, courtesy of a larger drop in European yields and continued uncertainty surrounding Brexit.

Gold and oil were lower. For the week, the major indexes advanced solidly led by the Nasdaq’s 2.2% gain.

The Markets…

The Dow Jones Industrial Average was up 78 points (0.3%) to 28,455

The S&P 500 Index was up 16 points (0.5%) to 3,221

The Nasdaq Composite gained 38 points (0.4%) to 8,925

In heavy volume before a holiday-shortened week, 2.8 billion shares were traded on the NYSE and 3.5 billion shares changed hands on the Nasdaq

WTI crude oil fell $0.74 to $60.44 per barrel and wholesale gasoline was flat at $1.71 per gallon

The Bloomberg gold spot price decreased $3.50 to $1480.90 per ounce

the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.3% to 97.67

Markets were up solidly for the week, as the DJIA added 1.1%, the S&P 500 Index advanced 1.7% and the Nasdaq Composite led the way with a 2.2% gain

Domestic output remains steady, personal income and consumer sentiment beat forecasts

The final look (of three) at Q3 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 2.1%, unrevised from the second revision to match the Bloomberg forecast. Q2 GDP grew by an unrevised 2.0% rate. Personal consumption was upwardly revised to a 3.2% increase, versus expectations for it to remain at a 2.9% gain.

On inflation, the GDP Price Index was unrevised at a 1.8% increase, matching estimates, while the core PCE Index, which excludes food and energy, was unadjusted at a 2.1% increase, also matching forecasts.

The December final University of Michigan Consumer Sentiment Index rose to 99.3 versus expectations for it to remain at the preliminary 99.2 reading and compared to November’s 96.8. The index posted the highest level since May 2018 as both the current conditions and expectations components of the survey improved. The 1-year inflation forecast dipped to 2.3% from November’s 2.5% rate, and the 5-10 year inflation forecast fell to 2.2% from November’s 2.5% pace, the lowest level since late 1970.

Treasuries were little changed with the yields on the 2-year and the 10-year notes remaining at 1.63% and 1.92%, respectively. The 30-year bond yield fell a single basis point to 2.34%.

Trade remains the focal point of global markets

In China, officials said the nation will be able to meet its pledge to purchase more than $40 billion in agriculture products from the U.S. There had been increased skepticism about China’s ability to hit the targets highlighted by the accord. Furthermore, comments from U.S. Treasury Secretary Steven Mnuchin indicated the Secretary is confident the accord will be signed in early January. The U.S. House passed the U.S., Mexico, Canada Agreement (USMCA) with bipartisan support.

The U.K. FTSE 100 Index finished up 0.1%, France’s CAC-40 Index and Germany’s DAX Index added 0.8%, Spain’s IBEX 35 Index increased 0.6%, Switzerland’s Swiss Market was 1.0% higher and Italy’s FTSE MIB Index rose 1.2%. The Shanghai Composite Index was down 0.4%, while the Hong Kong Hang Seng Index increased 0.3% and South Korea’s Kospi Index was 0.4% higher. Japan’s Nikkei 225 Index fell 0.2%. Australia’s S&P/ASX 200 Index was 0.3% lower and India’s S&P BSE Sensex 30 Index was little changed.

Stocks notch solid weekly gains on trade optimism and upbeat economic news

Stocks posted weekly gains, with the S&P 500 Index notching its tenth such out of eleven. Upbeat trade developments provided most of the sustenance for the solid advances, as a “phase one” deal between the U.S. and China appeared to remain on track, with comments from U.S. Secretary Steven Mnuchin that an accord could be signed by as early as next month solidifying the notion.

The U.S. House passed the long-elusive U.S., Mexico, Canada trade agreement (USMCA). The markets also found support from the monetary policy front as well, with the Bank of England holding steady on its stance and Sweden’s central bank moving out of negative interest rate territory. Some Brexit worries resurfaced early in the week, as Prime Minister Boris Johnson set a hard deadline of December 2020 for the U.K. to reach a trade deal with the European Union, but on Friday the U.K. Parliament approved Johnson’s withdrawal bill for the nation to leave the bloc in little over a month. The markets seemed to take the developments in stride, while also shrugging off the U.S. House’s vote to impeach President Donald Trump.

Market Insights 12/19/2019

A sluggish reading from the Conference Board’s Leading Economic Indicators, disappointing existing home sales and higher-than-expected jobless claims were not enough to derail the Santa Claus rally, as U.S. equites reached new highs today.

Treasuries clawed back into the green after starting the day lower. The Dollar Index was flat, as gains versus the pound were offset by loses versus other major peers.

The Markets…

The Dow Jones Industrial Average added 138 points (0.5%) to 28,337

The S&P 500 Index gained 14 points (0.5%) to 3,205

The Nasdaq Composite picked up 60 points (0.7%) to 8,887

In moderate volume, 967 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil was $0.33 higher at $61.18 per barrel and wholesale gasoline rose $0.03 to $1.71 per gallon

The Bloomberg gold spot price was $5.70 higher at $1,484.40 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 97.38

Jobless claims decline, Leading Index unchanged, and existing home sales fell

The Conference Board’s Index of Leading Economic Indicators (LEI) for November was unchanged month-over-month, below the Bloomberg projection of a 0.1% increase, and compared to October’s downwardly-revised 0.2% decline, which marked a third-straight monthly decline in the measure. Strength was seen in residential construction, financial markets, and consumers’ outlook, while the report showed weakness in manufacturing and labor markets.

Weekly initial jobless claims fell by 18,000 to 234,000, versus the Bloomberg estimate of 225,000, with the prior week’s figure being unrevised at 252,000. The four-week moving average rose by 1,500 to 225,500, while continuing claims gained 51,000 to 1,722,000, north of estimates of 1,676,000.

Existing home sales fell 1.7% m/m in November to an annual rate of 5.35 million units, compared to expectations of a slight decline to 5.44 million, while October’s 5.46 million rate was downward-revised to 5.44 million. The median existing home price rose 5.4% from a year ago to $271,300, marking the 93rd straight month of y/y gains. Unsold inventory came in at a 3.7-months pace at the current sales rate. Sales declined for the second time in three months, as activity rose m/m in the Midwest and Northeast, but declined in the South and in the West. Sales were higher y/y in all regions except the Northeast.

Treasuries were higher with the yield on the 2-year note down a basis point to 1.62%, the yield on the 10-year note dropping fractionally to 1.91%, and the 30-year bond rate flat at 2.35%

Tomorrow, on the economic front there will be a third look at third quarter U.S. Gross Domestic Product (GDP). No revision is expected from the previously reported 2.1% growth. December’s final reading from the University of Michigan Consumer Sentiment Index will also be released, with no change from the preliminary reading of 99.2 expected. Personal Income and Spending and a reading from Kansas City Fed Manufacturing Activity will round out the day.

Central banks dominate the headlines overseas, equities mixed

The Bank of England (BoE) decided to keep its benchmark interest rate at 0.75%, as expected, and opted to keep it asset purchases steady, while lowering its growth forecast. The Riksbank, Sweden’s central bank, which was one of the forerunners in employing negative interest rates, ended that policy today by raising its key rate from -0.25% to zero. The Bank of Japan left its monetary policy stance unchanged and in negative territory, as widely expected, and voted to maintain other asset purchases.

The U.K. FTSE 100 Index closed up 0.2%, Italy’s FTSE MIB Index was flat. France’s CAC-40 Index added 0.2% and Switzerland’s Swiss Market Index gained 0.1%. Spain’s IBEX 35 Index was down slightly and Germany’s DAX Index was 0.1% lower. The Shanghai Composite Index was little changed on the day, while the Hong Kong Hang Seng Index decreased 0.3% and South Korea’s Kospi Index ticked 0.1% higher. Japan’s Nikkei 225 Index fell 0.3% and Australia’s S&P/ASX 200 Index was 0.3% lower.

Random Thoughts

The financial media’s second leading story (behind the impeachment) is “how long will this rally last?”

Month to date (MTD) through December 17, the S&P 500 gained 1.6%, which is equal to the average for all Decembers since WWII and is on top of this November’s 3.4% climb.

Investors appear increasingly optimistic about future economic and EPS growth as the S&P 500 is on pace to record its 4th-highest Sept.-Dec. return since this bull market began.

However, we see the 500’s 18.75x multiple on next 12 month EPS forecasts, according to S&P Capital IQ consensus estimates, as being vulnerable.

In only 16 out of 913 weeks since 2002 has the market traded at loftier levels. The last time was during the nine-week stretch through the end of January 2018, which ended with the S&P 500 succumbing to a 10% correction.

Market Insights 12/16/2019

U.S. equities were flat on the day and U.S. Treasuries sold off steepener the yield curve a healthy sign of economic conditions.

The higher yields strengthened the dollar versus most of its major peers.

Global markets were mixed amid heightened Brexit concerns and the pound continued its slide relative to the dollar. Oil was slightly lower and gold was down in the face of higher global yields.

The Markets…

The Dow Jones Industrial Average shed 28 points (0.1%) to 28,239

The S&P 500 Index lost 1 point to 3,191

The Nasdaq Composite added 4 points (0.1%) to 8,828

856 million shares were traded on the NYSE and 2.6 billion shares changed hands on the Nasdaq

WTI crude oil was $0.02 lower at $60.85 per barrel and wholesale gasoline dropped $0.01 to $1.68 per gallon

The Bloomberg gold spot price was $1.90 lower at $1,480.60 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.2% to 97.39

Mortgage applications fall, economic calendar light

The MBA Mortgage Application Index fell 5.0% last week, following the prior week’s 3.8% increase. The decline came as 6.5% decrease in the Refinance Index met a 2.1% drop for the Purchase Index. The average 30-year mortgage rate remained at the prior month’s 3.98%.

Treasuries were lower, with the yield on the 2-year note up a basis point to 1.63%, while the yield on the 10-year note gained 4 bps to 1.92% and the 30-year bond yield added 5 bps to reach 2.35%.

Tomorrow will bring readings on the Current Account Balance and the Philadelphia Fed Business Outlook. Initial Jobless Claims, an important leading indicator, are expected to fall to 225,000 from last week’s 252,000.

Existing Home Sales are expected to slightly decline from last month’s level. Perhaps the most important release of the day will come from the Leading Index, which is expected to increase after falling slightly last month.

Global Markets Mixed

Stocks around the world finished mixed amid increased concerns of a possible no-deal Brexit, which were raised after Prime Minister Boris Johnson set a hard deadline of December 2020 to reach a trade deal with the European Union (EU). The U.K. is slated to leave the Euro bloc on January 31, 2020 and the move leaves little time for the two sides to come to an agreement, upping the odds for a “hard” exit, or one without a deal.

The euro and the British pound lost ground versus the U.S. dollar, while bond yields in the region rose.

The U.K. FTSE 100 Index finished up 0.1%, Spain’s IBEX 35 Index added 0.1%, Switzerland’s Swiss Market Index increased 0.2%, Italy’s FTSE MIB Index gained 0.5%,France’s CAC-40 Index dropped 0.2% and Germany’s DAX Index declined 0.5%.

Asian equities were also mixed with little news coming from the region. The only report of note came from Japan and showed the nation’s exports fell for the 12th straight month. However, the fall was less than economists had anticipated.

The Shanghai Composite Index ticked 0.2% lower, the Hong Kong Hang Seng Index increased 0.2% and South Korea’s Kospi Index was little changed. Japan’s Nikkei 225 Index fell 0.6% amid some strength in the yen. India’s S&P BSE Sensex 30 Index gained 0.5% and Australia’s S&P/ASX 200 Index inched 0.1% higher.