Market Recap - Stocks Revisit October Highs

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The Stock Market Endured A Volatile Start To The Week, But A Strong Second Half Helped The Major Averages Secure Gains. The S&P 500 Rose 0.6% While The Nasdaq Composite Outperformed, Gaining 0.9% Since Last Friday.

Trade-related headlines were the focus of the week, which saw the latest round of talks between officials from China and the U.S on Thursday and Friday. The S&P 500 fell below its 50-day moving average early in the week when it was announced that 28 Chinese companies were put on a blacklist that blocks them from doing business with U.S. companies without a special license. The news led to concerns that official discussions on Thursday and Friday would not yield any results.

However, the overall tone improved on Wednesday and Thursday amid a torrent of mostly positive-sounding headlines. The S&P 500 reclaimed its 50-day moving average on Thursday, jumping to a ten-day high on Friday. The Friday session featured news about a partial trade deal being reached, but the details were underwhelming. Also on Friday, the Federal Reserve announced that it will begin regular purchases of Treasury bills at a pace of $60 bln per month on October 15 and continue into the second quarter of 2020 or longer.

Seven out of eleven sectors ended the week with gains, climbing between 0.8% (communication services) and 1.9% (materials). On the downside, countercyclical real estate (-0.6%), consumer staples (-0.9%), and utilities (-1.4%) recorded losses as Treasury yields rose amid an improvement in risk tolerance.

Apple (AAPL) rallied 3.9% to a fresh record high, boosted by news about increased production of components for the iPhone 11. Utility provider PG&E (PCG) lost more than 25.0% for the week on a negative court ruling.

Market Recap - Economic Data Leaves Wall Street Mixed In VolatileStart To Fourth Quarter

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The S&P 500 Declined 0.3% In A Volatile Week Of Trading. Several Economic Reports Reawakened Growth Concerns And Contributed To Heavy Selling, But The Market Was Able To End The Week On A Positive Note Following Decent Employment Data For September.

The Dow Jones Industrial Average lost 0.9%, and the Russell 2000 lost 1.3%. The Nasdaq Composite increased 0.5%.

Five S&P 500 sectors finished lower, while six finished higher. The energy (-3.8%), materials (-2.5%), industrials (-2.4%), and financials (-2.2%) sectors posted big losses, as did the Dow Jones Transportation Average (-3.0%). The information technology (+1.1%) and health care (+0.9%) sectors showed relative strength. The Philadelphia Semiconductor Index rose 2.0%.

This week's market-moving reports (in order of release) included the ISM Manufacturing Index, ISM Non-Manufacturing Index, and Employment Situation Report:

  • The ISM Manufacturing Index for September declined to 47.8% ( consensus 50.2%) from 49.1% in August for its worst reading since June 2009.

  • The ISM Non-Manufacturing Index for September fell to 52.6% ( consensus 55.4%) from 56.4% in August.

  • September nonfarm payrolls increased by 136,000 ( consensus 150,000) following upward revisions in August and July. The unemployment rate dropped to 3.5%, which is the lowest since December 1969. Average hourly earnings were flat ( consensus +0.3%).

The continued weakness in the manufacturing sector forced investors to reassess earnings prospects and premium valuations, especially if the weakness tricked over into the consumer-oriented services sector. As suspected, and evidenced by the data, non-manufacturing activity did slow down, but the ensuing selling may have been too much, too soon.

At one point, the S&P 500 was down 4.1% in less than three sessions. An opportunistic mindset took fold, likely contributing to some short-covering activity, to help the broader market bounce from a short-term oversold condition. The buy-the-dip momentum picked up after the employment report showed modest jobs growth, propelling the S&P 500 back above its 50-day moving average (2942) by week's end.

Apple (AAPL) had a great week. Apple shares rose 3.7% this week after JP Morgan raised its price target to $265 from $243 and the Nikkei Asian Review reported it asked its suppliers to increase iPhone 11 production by up to 10%.

Another noteworthy story included Charles Schwab (SCHW) eliminating commissions for stocks, ETFs, and options listed on U.S. or Canadian exchanges. E*Trade (ETFC) and TD Ameritrade (AMTD) followed suit, and shares of all three companies posted huge losses this week.

U.S. Treasury yields continued to decline amid the growth concerns and growing expectations for the Fed to cut rates not only in October but also in December. The 2-yr yield fell 23 basis points to 1.39%, and the 10-yr yield fell 16 basis points to 1.52%. The U.S. Dollar Index declined 0.3% to 98.74. WTI crude dropped 5.6% to $52.78/bbl, further pressured by rising inventory levels.

Market Recap - Stock Market Ends Week Lower, Undercut By Headlines

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The Major U.S. Indices Lost Ground This Week, As The Market Appeared Rattled By Negative-Sounding Headlines Related To Trade And Politics. The Dow Jones Industrial Average Declined Just 0.4%, But The S&P 500 (-1.0%), Nasdaq Composite (-2.2%), And Russell 2000 (-2.5%) Posted Sizable Losses. 

The market had two noticeable declines this week, with the first one coming on Tuesday as the market paid heed to the launch of an impeachment inquiry on President Trump. It seems unlikely at this point that anything material will transpire, but the political wrangling and uncertainty in how much this will affect trade negotiations weighed on sentiment.

Through all the ensuing political headlines, the market was still trending toward a relatively flat week on Friday. That was the case until headlines out of Bloomberg indicated that the White House was considering limiting U.S. investors' portfolio flows into China and delisting Chinese companies from U.S. stock exchanges. Granted, these were just headlines, but they clouded the outlook for a trade deal and threatened to upend the good will established by both countries ahead of trade talks on Oct. 10-11. 

The S&P 500 health care (-3.0%), energy (-2.6%), and communication services (-2.3%) sectors led the broader retreat. Many energy stocks were pressured by the continued decline in oil prices ($55.90/bbl, -$2.19, -3.8%) as supply concerns dissipated. The communication services sector was weighed down by shares of Facebook (FB), which lost nearly 7% amid recurring antitrust concerns. 

Micron (MU) shares sold off 11% on Friday, pressured not only by the negative-minded trade speculation but also by soft guidance and a record inventory level. The Philadelphia Semiconductor Index lost 1.3% this week.

The defensive-oriented consumer staples (+1.2%), utilities (+1.3%), and real estate (+0.2%) sectors were the lone sectors that finished higher. Demand for U.S. Treasuries wasn't too noticeable, as yields only declined modestly this week. The 2-yr yield declined three basis points to 1.65%, and the 10-yr yield declined three basis points to 1.69%. The U.S. Dollar Index advanced 0.6% to 99.10.

This might have been due to an understanding that the U.S. economy remains in decent shape. For instance, weekly jobless claims remained at historically low levels (213,000); the annual pace of new home sales for August (713,000) was one of the highest readings since October 2007; pending home sales rebounded 1.6% in August ( consensus 0.6%); preliminary data showed encouraging manufacturing activity in the U.S. for September; and inflation pressure remained muted.

Still, it wasn't a good week for the broader market, and it was arguably a terrible week for IPOs. Peloton (PTN) fell 11% in its first day of trading, which reportedly caused Endeavor Group to scrap its IPO one day before going public. The We Company (WE) postponed its IPO while Adam Neumann was pressured to step down as CEO.

Market Recap - Stocks Extend Rebound Rally into September, Cyclical Sectors Set the Pace

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The Stock Market Rallied For The Second Straight Week, Supported By Developments In Trade And Politics And Encouraging Economic Data. The S&P 500 (+1.8%), Nasdaq Composite (+1.8%), And Dow Jones Industrial Average (+1.5%) Each Increased At Least 1.5%. The Russell 2000 (+0.7%) Trailed Its Larger‐Cap Peers.

This week's leaders included the cyclical S&P 500 consumer discretionary (+2.6%), energy (+2.6%), and information technology (+2.4%) sectors ‐ all of which rose over 2.0%. The defensive‐oriented utilities (+0.4%) and health care (+0.7%) sectors were the lone groups that increased less than 1.0%.

The shortened trading week began on a lower note, as retaliatory tariffs from the U.S. and China went into effect and data from the ISM showed the U.S. manufacturing sector slip into contraction territory in August for the first time since 2016. Stocks rallied sharply over the next two days, though, as Hong Kong said it would withdraw its extradition bill and China said it agreed to meet in Washington for trade talks in early October.

The takeaway from the Hong Kong and U.S.‐China trade situations was that conditions did not deteriorate, which was good for sentiment. A slate of encouraging economic data, including solid growth in non‐manufacturing activity for August, helped stave off recessionary fears. The Employment Situation Report for August did show U.S. hiring activity slow down to a more modest pace, though.

Specifically, nonfarm payrolls increased by 130,000 ( consensus 171,000) and nonfarm private payrolls increased by 96,000 ( consensus 145,000). A closer look, though, showed that more people are working and earning money, which is a good recipe to support the economy expansion, one which Fed Chair Powell repeated the Fed is intent on sustaining.

U.S. Treasuries finished lower this week, pushing yields slightly higher. The 2‐yr yield increased two basis points to 1.52%, and the 10‐yr yield increased four basis points to 1.55%. The U.S. Dollar Index fell 0.5% to 98.42. WTI crude rose 2.5%, or $1.39, to $56.45/bbl.

The weaker dollar was another positive consideration for the market, especially for the earnings prospects of U.S. multinational companies. Some of its weakness was attributed to noticeable strength in the British pound as Parliament moved to block a no‐deal Brexit on Oct. 31.

Market Recap - Stocks Snap Losing Streak, Trade Comments Inspire Rebound Rally

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The S&P 500 Rose 2.8% This Week, Snapping A Four-Week Losing Streak As The Market Turned More Optimistic On Trade Dealings With China. The Dow Jones Industrial Average Increased 3.0%, The Nasdaq Composite Increased 2.7%, And The Russell 2000 Increased 2.4%. 

All 11 S&P 500 sectors finished higher with gains ranging from 1.8% (utilities) to 3.6% (industrials). Trade-sensitive areas like the Dow Jones Transportation Average (+4.0%) and Philadelphia Semiconductor Index (+4.1%) outperformed the broader market.

Prior to Monday's open, those results might have looked less probable. On Sunday, futures extended last Friday's sell-off after President Trump responded to Chinese retaliatory tariffs by increasing the tariff rates on $525 billion of Chinese imports. That negative reaction was short-lived, however, after President Trump said China called top U.S. negotiators to express interest in restarting trade talks, which China denied multiple times.

The market, perhaps exhausted from the trade uncertainty, recessionary fears, and volatility, latched onto the president's remarks as an excuse to rebound. The week's trade-inspired rally grew some legs after China said it wasn't immediately looking to retaliate against the latest tariff increases and repeated its willingness to resolve their dispute through "calm" negotiations.

This reprieve in trade tensions, coupled with month-end rebalancing that tends to favor risk assets after a four-week losing streak, helped risk sentiment return to the market. From a technical standpoint, the S&P 500 remained bounded by its 50-day moving average (2945) as the benchmark index briefly challenged the key technical average before pulling back.

Economic data this week showed the U.S. consumer, whose spending accounts for approximately 70% of GDP, to remain in good standing. Personal spending increased better than expected in July, and consumer spending growth was upwardly revised for the second quarter. The trade dispute, however, contributed to a downward revision to consumer sentiment for August, threatening to temper discretionary spending activity in the months ahead.

The U.S. Treasury market was more reserved this week, but yields still finished lower. The 2-yr yield declined three basis points to 1.50%, and the 10-yr yield declined two basis points to 1.51%. The U.S. Dollar Index advanced 1.2% to 98.81. WTI crude rose 1.7% to $55.06/bbl.

Market Recap - Stocks lose ground, U.S. Treasury Market Flashes Recession Signal, But Consumer Remains Resilient

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The Stock Market Finished Lower This Week In Another Wild Ride On Wall Street. The S&P 500 (-1.0%), Dow Jones Industrial Average (-1.5%), And Russell 2000 (-1.3%) Lost At Least 1.0%, While The Nasdaq Composite (-0.8%) Fared Slightly Better.

Eight of the 11 S&P 500 sectors finished lower. The energy sector (-3.9%) led the retreat, followed by the financials sector (-2.2%) amid another steep drop in U.S. Treasury yields. The lower yields, however, benefited the utilities (+0.5%) and real estate (+0.3%) sectors, while the consumer staples sector (+1.6%) showed some strength. The Philadelphia Semiconductor Index (+1.0%) also finished higher amid some hope that the U.S. and China could still work on a trade deal.

The week began with investors continuing to seek safety in U.S. Treasuries and gold. Growth concerns, however, were temporarily set aside after the White House announced that it will delay the 10% tariff rate for some items imported from China, including cell phones and laptops, until Dec. 15. The news sparked a relief rally that quickly evaporated following another round of disappointing data from China and Germany.

The rush back to safety briefly sent the yield on the 10-yr note below the yield on the 2-yr note for the first time since 2007, which is an inversion that has preceded each recession since 1980. The average length of time between the first inversion and the start of each recession since 1980 has averaged 18 months, with the range being as little as ten months to as many as two years.

The 2-yr yield fell 16 basis points to 1.47%, and the 10-yr yield fell 19 basis points to 1.54%. The U.S. Dollar Index increased 0.7% to 98.18. WTI crude increased 0.5% to $54.89/bbl.

Understandably, the 2s10s spread inversion spooked some investors, but the resiliency of the U.S. consumer, whose spending accounts for approximately 70% of GDP, helped ease some nerves. This sentiment flowed from a 0.7% m/m increase in retail sales for July ( consensus 0.3%) and solid earnings results and higher guidance from Walmart (WMT).

On a related note, President Trump said he delayed some tariffs (most will still go into effect on Sept. 1) to ensure consumer spending isn't hurt during the Christmas shopping season.

Separately, many institutions around the world, including the ECB, China, and Germany, were reportedly taking steps to stimulate growth if need be. This support helped foster some risk sentiment late in the week.

Market Recap - Volatility Spikes And Rattles Wall Street, But Market Ends Week Modestly Lower

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It Was A Wild Week On Wall Street, Which Was Shaken Up By Concerns Over Growth, Trade, Yields, And Even Currencies. Despite All The Negative-Minded Speculation, The S&P 500 Only Finished The Week Down 0.5%.

The Dow Jones Industrial Average lost 0.8%, the Nasdaq Composite lost 0.6%, and the Russell 2000 lost 1.3%.

Out of the 11 S&P 500 sectors, six finished lower while five finished higher. The energy (-2.2%) and financials (-1.7%) sectors underperformed, while the defensive-oriented utilities (+1.0%) and real estate (+1.8%) sectors outperformed.

Two events were widely attributed to the early sell-off that extended last week's pullback: (1) China allowed the yuan to weaken beyond 7 per dollar in response to President Trump's tariff threat and (2) U.S. Treasury yields took a sharp downturn that further flattened the yield curve.

The former happened on Monday, which caused each of the major averages to lose more than 3% in the worst one-day performance of 2019. Adding to the sour mood was the U.S. labeling China a currency manipulator for the first time since 1994 and China halting U.S. agricultural purchases.

Stocks recouped some losses once China signaled it will keep the yuan stable, but the market returned to those lows on Wednesday after yields took a startling leg lower. Once yields stabilized, though, the stock market was able to finish the week well off those lows despite the lingering trade and growth concerns.

Low rates were nothing new for the market, which had seen yields steadily decline since November. In fact, low yields, and the expectation that they will remain low due to global central banks signaling for easier monetary policy, has been cited as a catalyst for the equity rally this year. Three more central banks -- from New Zealand, India, and Thailand -- cut rates sharper than expected this week.

Rather, the narrowing spread between the 2-yr and 10-yr yields made some investors nervous. The 2-10 spread, which is widely viewed as a possible indicator for a recession, narrowed to its lowest differential since 2007. By week's end, the 2-yr yield finished down eight basis points to 1.63%, and the 10-yr yield finished down 13 basis points to 1.73%. The U.S. Dollar Index fell 0.5% to 97.54. WTI crude lost 2.0% to $54.61/bbl.

Separately, gold prices rose 3.5%, or $51.00, to $1508.50/oz this week, boosted by lower yields, the weaker dollar, and economic uncertainty. For the year, gold is now up 14.9%, just below the S&P 500's 16.4% return.

Market Recap - Stock Market Falls, Fed Cuts Rates, Trump Threatens China With More Tariffs

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The Stock Market Sold Off This Week With A Bulk Of Its Losses Coming After President Trump Threatened A 10% Tariff Rate On $300 Billion Of Chinese Goods, Effective September 1.

The S&P 500 (-3.1%) and the Nasdaq Composite (-3.9%) pulled back considerably from last week's record highs, while the Dow Jones Industrial Average (-2.6%) and Russell 2000 (-2.9%) also had poor performances. 

Heading into the week, investors already knew it was going to be eventful. Earnings were in full force, highlighted by upbeat results and guidance from Apple (AAPL); the Fed held its policy meeting that concluded with a 25-basis points rate cut and an announcement to end its balance sheet reduction efforts two months ahead of schedule; U.S.-China trade talks wrapped up in Shanghai, albeit with little progress; and the July employment report showed another decent gain in nonfarm payrolls. 

Still, none of these outcomes appeared to stir much conviction among investors. Instead, stocks fell noticeably after Fed Chair Powell described the July rate cut as a "mid-cycle adjustment," although much of that decline was erased the following day as investors regrouped to the idea of low rates and a suggestion from Mr. Powell that monetary policy could still accommodate another rate cut.

That was the case until President Trump's tariff threat on Thursday reignited trade and growth concerns that send stocks and U.S. Treasury yields sharply lower and undid the gains in oil ($55.74, -$0.45, -0.8%).

Nine of the 11 S&P 500 sectors finished lower with seven sectors losing at least 3.0%. The consumer discretionary (-4.6%) and information technology (-4.4%) sectors fell over 4.0%, while the utilities (+0.3%) and real estate (+2.1%) sectors benefited from the lower interest rates. 

The trade-sensitive semiconductor and transportation stocks also succumbed to heavy selling pressure. The Dow Jones Transportation Average dropped 3.7%, and the Philadelphia Semiconductor dropped 6.6%. Disappointing guidance from Advanced Micro Devices (AMD) also weighed on the semiconductor group. 

Aside from the obvious drop in equities, the flattening of the yield curve was also a discouraging development for investors and lenders that depend on healthy net interest margins. The spread between the 2-yr yield and 10-yr yield narrowed to 15 bps from 21 bps last week. The 2-yr yield fell 16 basis points to 1.71%, and the 10-yr yield fell 22 basis points to 1.86%. The U.S. Dollar Index increased 0.1% to 98.10, briefly hitting a two-year high before pulling back following the tariff news. 

Market Recap - Stock Market Sets New Record Highs, as Earnings Remain Positive

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The Stock Market Finished The Week Higher With The S&P 500 (+1.7%) And Nasdaq Composite (+2.3%) Setting New Record Highs In The Process. 

Upbeat earnings results throughout the week, and an encouraging first look into second-quarter GDP, helped the stock market continue its upward trend. The Russell 2000 advanced 2.0%. The Dow Jones Industrial Average increased just 0.1%, undercut by an 8.6% weekly decline in shares of Boeing (BA) amid ongoing company-specific issues.

More than 40% of S&P 500 companies have now released their earnings reports, according to FactSet, and most of the results this week continued to come in better than expected. Alphabet (GOOG) exceeded expectations, and shares climbed more than 10% the following day. Investors were less pleased, however, with tepid revenue guidance from Facebook (FB) and a profit miss from Amazon (AMZN).

The S&P 500 communication services sector (+4.6%), which is home to Alphabet, was this week's outright leader. The financials (+2.7%) and information technology (+2.4%) sectors followed suit, while the energy (-0.6%) and utilities (-0.6%) sectors finished lower.

The Philadelphia Semiconductor Index remained on a tear, rising 4.6% this week on positive commentary out of Goldman Sachs, upbeat earnings results from Texas Instruments (TXN), and news that the U.S. will head to China next week to continue trade talks. For the year, the PHLX is now up 38.0%.

On the data front, the advance estimate for second-quarter GDP increased at a seasonally adjusted annual rate of 2.1% ( consensus 1.8%). Although the U.S. economy did slow down from the 3.1% growth recorded in the first quarter, strong consumer spending helped the economy grow better than expected.

The upbeat data is likely to feed into Boston Fed President Rosengren's (FOMC voter) view that the Fed should keep rates unchanged at its policy meeting next week. Mr. Rosengren's stance is a minority position in the market's mind, though, especially at a time when central banks around the world, including the European Central Bank, have called for easier monetary policy.

U.S. Treasuries ended the week little changed, leaving yields at relatively low levels that continued to favor risk assets. The 2-yr yield increased three basis points to 1.87%, and the 10-yr yield remained unchanged at 2.08%. The U.S. Dollar Index advanced 0.9% to 98.01. WTI crude advanced 1.0% to $56.19/bbl.

Separately, the Department of Justice announced a broad antitrust review into the "market-leading online platforms" this week. Investors didn't appear too concerned about the regulatory overhang, though, amid the positive mood in the market.

Market Recap - Wall Street Pulls Back From Record Highs As Earnings Season Kicks Off

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The Major Averages -- S&P 500 (-1.2%), Dow Jones Industrial Average (-0.7%), And Nasdaq Composite (-1.2%) -- Began The Week By Eking Out Record Closes, But The Stock Market Ultimately Looked Uninspired During The First Week Of The Second Quarter Earnings-Reporting Season.

The Russell 2000 lost 1.4%. Earnings reports came in mostly better than expected, including those from the big banks and Microsoft (MFST). Many of these stocks reacted positively to the good news, but the lack of positive price action in the market suggested that much of the goods news may have already been priced in. 

Shares of those companies that didn't at least meet expectations, however, like Netflix (NFLX) and CSX Corp. (CSX) were punished. Disappointing guidance from CSX rattled the Dow Jones Transportation Average (-0.3%), which fell 3.6% on Wednesday before earnings reports from Union Pacific (UNP) and KC Southern (KSU) welcomed renewed buying interest.

The S&P 500 communication services sector (-3.1%) was this week's laggard, as shares of Netflix fell 13% in the two sessions following its earnings report. The real estate (-2.3%) and energy (-2.7%) sectors were added weights on the market. Energy stocks were pressured by oil prices ($55.66/bbl, -$4.55) losing nearly 8% this week, although prices stabilized on Friday after Iran seized a British oil tanker. 

The consumer staples (+0.2%) and materials (+0.2%) sectors were the lone sectors that finished higher. The Philadelphia Semiconductor Index was a notable standout, rising 1.3% following positive earnings results and hopeful commentary from Taiwan Semi (TSM).

Another round of Fedspeak this week affirmed the market's expectations for at least a 25-basis points rate cut at the July 30-31 FOMC meeting. According to a report from The Wall Street Journal on Friday, the Fed is signaling that it will go ahead with the quarter-point cut.

That shouldn't be too surprising considering that economic data didn't convey any strong indications for a sharp rate cut. Retail sales for June increased 0.4% ( consensus 0.2%), and the Philadelphia Fed Index for July climbed to 21.8 ( consensus 5.0) from 0.3 in June.

U.S. Treasuries edged higher, pushing yields lower across the curve. The 2-yr yield declined two basis points to 1.82%, and the 10-yr yield declined three basis points to 2.05%. The U.S. Dollar Index advanced 0.3% to 97.15.