Market Recap - Stock Market Continues Record Run as Trade Talks Progress and Investors Embrace Risk

The S&P 500 (+0.9%), Dow Jones Industrial Average (+1.2%), and Nasdaq Composite (+0.8%) set new records this week, with the bulk of this week’s gains coming on Friday after NEC Director Larry Kudlow said a Phase One trade agreement was close to being reached.

The small-cap Russell 2000 (-0.2%) was left out of the rally. Commerce Secretary Wilbur Ross and Director of Trade and Manufacturing Policy Peter Navarro expressed similar views on trade. Other “people familiar with the talks,” however, told news outlets that both sides are struggling to overcome issues on exiting tariffs, enforcement mechanisms, and agricultural purchases.

The market remained optimistic, yet somewhat cautious as money flowed into the defensiveoriented health care (+2.4%), real estate (+1.9%), and utilities (+1.5%) sectors. The outperformance of the market’s biggest technology names like Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOG) seemed like a “safe” play, too.

Laggards included the S&P 500 energy (-1.3%), financials (-0.3%), and consumer discretionary (-0.2%) sectors. Cisco Systems (CSCO) fell sharply on disappointing quarterly guidance.

Well-received corporate news came out of Walt Disney (DIS), Boeing (BA), and Walgreens Boots Alliance (WBA).

Disney said 10 million users signed up for Disney+ in its first day. Boeing said it expects 737 MAX deliveries to resume in December and commercial service to resume in January. Walgreens reportedly received a leveraged buyout offer from KKR & Co. (KKR).

Separately, President Trump’s speech at the Economic Club of New York and Fed Chair Powell’s two-day congressional testimony were two high-profile events this week. Neither, however, provided the market information it didn’t already know about trade negotiations, the economy, or monetary policy.

U.S. Treasuries finished the week higher, which sent yields lower across the curve. The 2-yr yield declined five basis points to 1.61%, and the 10-yr yield declined ten basis points to 1.83%. The U.S. Dollar Index declined 0.4% to 97.99. WTI crude increased 0.9%, or $0.54, to $57.75/bbl.

Market Recap - Stock Market Continues Record Run as Trade TalksProgress and Investors Embrace Risk

The S&P 500 (+0.9%), Nasdaq Composite (+1.1%), And Dow Jones Industrial Average (+1.2%) Broke Out To New Record Highs In A Week Full Of Trade Headlines That Were Viewed Favorably By The Market.  

Cyclical sectors set the pace while U.S. Treasuries sold off. The small-cap Russell 2000 (+0.6%) trailed its large-cap peers.

Commerce Secretary Wilbur Ross started the week by saying "good progress " was being made in "Phase One" negotiations. Progress this week consisted of discussions taking place to remove some tariffs in order to sign this first section, which will reportedly be pushed back to December as both sides continue to discuss terms and a venue.

China's Commerce Ministry announced that it reached an agreement with the U.S. for both sides to phase out tariffs, but President Trump said he had yet to agree to roll back existing tariffs. White House Director of Trade and Manufacturing Policy Peter Navarro confirmed reports that there were at least considerations being made to delay the Dec. 15 tariffs.

The key takeaway was that the market continued to think that some sort of deal will still get signed, unless there are material developments to suggest otherwise. This optimistic view continued to foster a risk-on mindset in the stock market and a bearish sentiment in the Treasury market.

The Dow Jones Transportation Average (+3.1%) and S&P 500 financials sector (+2.4%) outperformed this week and both groups hit 52-week highs. The Philadelphia Semiconductor Index (+2.8%) and the S&P 500 information technology (+1.7%) and industrials (+1.9%) sectors set new all-time highs. The energy (+2.0%) and materials (+2.0%) sectors also outperformed.

The sell-off in the Treasury market sent yields higher in a curve-steepening trade that contributed to the outperformance of the financials sector. The higher yields, though, did hurt sentiment in the real estate (-3.7%) and utilities (-3.7%) sectors.

The 2-yr yield rose ten basis points to 1.66%, and the 10-yr yield rose 20 basis points to 1.93%. The U.S. Dollar Index advanced 1.2% to 98.37. WTI crude rose $1.00 (+1.8%) to $57.21/bbl.

Other positive reminders for the market were monetary policy remains favorable, the labor market remains strong, and the U.S. consumer remains in good shape. For some investors, this reinforced a fear of missing out on a market breaking out to record highs amid signs of trade progress.

Market Recap - S&P 500, Nasdaq Set Record Highs in Week Where Fed Cuts Rates and Jobs Growth Exceeds Expectations

The S&P 500 (+1.5%) And Nasdaq Composite (+1.7%) Both Set Record Highs In This Macro-Driven Week That Featured The Fed, Economic Data, Earnings Reports, And Trade News. The Dow Jones Industrial Average Rose 1.4%, And The Russell 2000 Rose 2.0%.

The Fed is a good place to start after it cut the target range for the fed funds rate by 25 basis points to 1.50-1.75%. This was expected, but the central bank signaled that another quarter-point cut shouldn't be expected soon. Fed Chair Powell added that he would need to see a significant rise in inflation for rates to increase, suggesting that the Fed is on hold as expectations for inflation remain relatively low.

The latter point took the S&P 500 to fresh all-time highs on Wednesday, which was then jolted by a better-than-expected employment report for October and better-than-feared ISM Manufacturing Index for October on Friday. At week's end, eight of the 11 S&P 500 sectors were up, with the value-oriented health care sector (+3.0%) rising above the cyclical information technology (+2.1%), industrials (+2.0%), and financials (+1.5%) sectors.

Unfortunately, the real estate (-0.7%), energy (-0.3%), and utilities (-0.1%) sectors were left out of the rally, as were growth stocks following their earnings reports.

Expectations for jobs growth were subdued given the 40-day strike at GM, but the 128,000 nonfarm payrolls (Briefing.com consensus 80,000) added to the economy not only exceeded estimates but also followed upwards revisions for August and September. It should be noted that the manufacturing sector remained in contraction territory for the third straight month.

There was still more good than bad for the market to digest: Rates are expected to remain low amid a resilient labor market and low inflation levels, the U.S. and China continue to work towards a trade deal, and Apple (AAPL) and Facebook (FB) reported positive quarterly results.

As for trade, it was reported that Chinese officials have expressed doubts about securing a comprehensive trade deal with President Trump, but the USTR office reportedly said that progress has been made in resolving outstanding issues. "Phase one" is also on track to be signed later this month, but not at the planned APEC summit in Chile due to the ongoing protests in the country.

U.S. Treasuries did see increased demand this week, which drove yields lower. The 2-yr yield declined seven basis points to 1.56%, and the 10-yr yield declined seven basis points to 1.73%. The U.S. Dollar Index fell 0.6% to 97.24. 

Market Recap - Cyclical Sectors Lead S&P 500 Back to Record Levels in Earnings‐driven Advance

The S&P 500 Advanced For The Third Straight Week, Rising 1.2% And Nearly Setting New Record Highs As Investors Remained Generally Pleased With Earnings Reports. The Dow Jones Industrial Average Rose 0.7%, The Nasdaq Composite Rose 1.9%, And The Russell 2000 Rose 1.5%.

The value‐oriented S&P 500 energy sector (+4.3%) was this week's outright leader, with oil prices ($56.44, +2.68, +5.0%) climbing 5%. The information technology (+2.5%), industrials (+2.2%), and financials (+2.0%) sectors followed suit, while the real estate (‐1.1%) and consumer discretionary (‐0.8%) sectors were left behind.

Twelve of the 30 Dow components reported earnings this week. Positive reactions belonged to Procter & Gamble (PG), United Technologies (UTX), Caterpillar (CAT), Boeing (BA), Microsoft (MSFT), Dow Inc. (DOW), Visa (V), Intel (INTC). Conversely, McDonald's (MCD), 3M (MMM), Travelers (TRV), and Verizon (VZ) failed to stir much enthusiasm following their results.

Investors seemingly looked for positive signs, if any, for a reason to overlook the negative. A better‐than‐feared outlook for the return of Boeing's 737 MAX helped investors overlook its earnings miss and prior analyst downgrades. Similarly, positive results and upbeat guidance from Lam Research (LRCX) and Intel (INTC) outweighed negative ones from Texas Instruments (TXN).

Caterpillar didn't even need a reason to rally soon after its disappointing results and guidance. Amazon (AMZN) missed profit estimates and provided a cautious outlook for the holiday quarter, but shares were able recover nicely.

On Friday, after all earnings reports were released for the week, the benchmark index was less than one point from its intraday high (3027.98). The mood was helped by the USTR office saying it was close to finalizing some sections of a "Phase One" trade deal with China. The news sent an unchanged 10‐yr yield up four basis point to 1.80% to end the week.

Tucked behind all the headlines was Apple (AAPL) quietly rising 4.3% as analysts continued to increase their price targets for the stock. Apple will report quarterly results next week.

Other story stocks this week included Biogen (BIIB) surprising investors by saying it will seek FDA approval for its Alzheimer's drug in 2020 after it had renounced the treatment in March. Tesla (TSLA) reporting a surprise profit. Nike (NKE) and Under Armour (UAA) announced on the same day that their CEOs will be stepping down from the helm next year.

Market Recap - Stocks End The Week Mostly Higher In Good Start To Earnings Season

The S&P 500 Advanced 0.5% This Week, As The First Busy Week Of Earnings Reports For The Third Quarter Was Generally Viewed As Better Than Feared. The Benchmark Index Outpaced The Nasdaq Composite (+0.4%) But Fell Behind The Russell 2000 (+1.6%).

The Dow Jones Industrial Average (-0.2%) gave up its weekly advance on Friday after shares of Johnson & Johnson (JNJ) and Boeing (BA) lost over 6% apiece on negative news. 

Starting with the good news, seven of the 11 S&P 500 sectors finished in positive territory, with health care (+2.0%), real estate (+1.8%), and financials (+1.6%) advancing the most. The Dow Jones Transportation Average (+2.1%) stood out, too. 

The financials sector was powered by upbeat earnings results from JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) among others. Positive reactions to results from United Airlines (UAL), J.B. Hunt Transport Services (JBHT), CSX (CSX), and KC Southern (KSU) accounted for the outperformance of the transportation average. 

The health care space not only benefited from an earnings-driven gain in UnitedHealth (UNH) but also by news that a $50 billion package offered by five companies, including Johnson & Johnson, could settle the opioid lawsuits.

JNJ also beat earnings expectations but its subsequent drop on Friday followed news that it recalled 33,000 bottles of baby power for traces of asbestos. Boeing took a hit after Reuters reported that the company may have misled the FAA about the safety of its 737 MAX based on instant messages between two employees in 2016.

The energy sector (-1.7%) was this week's laggard, followed by information technology (-0.9%) amid a revenue miss from IBM (IBM) and possibly some de-risking efforts. 

Economic data wasn't too positive this week, but it did help strengthen expectations for a Fed rate cut at the October FOMC meeting. Most notably, U.S. retail sales unexpectedly declined 0.3% in September (Briefing.com consensus +0.3%), and China's Q3 GDP (+6.0%) grew at its slowest year-over-year pace in 27+ years. 

As for trade, reports indicated that China may struggle fulfilling its agreement to purchase $50 billion of U.S. agricultural goods unless President Trump lifts retaliatory tariffs. Complicating the matter, China threatened unspecified countermeasures against the U.S. if it passes legislation that supports pro-democracy protesters in Hong Kong. 

The U.S. Treasury market was more reserved this week, with investors perhaps waiting for Saturday's Brexit vote in Parliament. The 2-yr yield declined three basis points to 1.57%, the 10-yr yield was unchanged at 1.75%. The U.S. Dollar Index fell 1.1% to 97.26. WTI crude fell 1.8% (-$0.99) to $53.76/bbl. 

Market Recap - Stocks Revisit October Highs

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

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% (Briefing.com 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% (Briefing.com consensus 55.4%) from 56.4% in August.

• September nonfarm payrolls increased by 136,000 (Briefing.com 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 (Briefing.com 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

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 (Briefing.com 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

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 (Briefing.com consensus 171,000) and nonfarm private payrolls increased by 96,000 (Briefing.com 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

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.