Stocks continued higher last week, as the S&P 500 rose by 0.16 percent to 3,145.91. That left the benchmark index up 25.49 percent 2019-to-date, and just 0.24 percent below the all-time closing high. Equities actually started last week off under significant pressure, as major indices tumbled due to disappointing headlines about the prospects for a trade deal being reached this month. The speed with which stocks declined is to be expected given certain market dynamics, as well as the likelihood that many traders may have simply been eager for an excuse to take profits (sell) following the best 7-week rally since July. Although the round-trip back to record highs suggests the bulls were able to regain control, such trade war concerns could stay in focus this week because we are rapidly approaching the December 15th deadline for the next round of tariffs to kick in.
This is important because the new levies, compared to existing tariffs, will have a much more direct impact on U.S. consumers, by far the key sustaining factor behind our record-long economic expansion in America. Even if no breakthrough deal is reached this week, many investors remain hopeful that the White House will ultimately decide to scrap or at the very least delay these proposed tariffs that as of this writing are still scheduled to go into effect during the heart of the holiday shopping season. However, volatility could easily ramp up every day that we get closer to the tariff deadline without any definitive announcement out of Washington. This is especially true since a major driver of the Q4 run-up in stock prices has been the general assumption by many market participants that the December tariffs would be avoided. Moreover, with there being various other tail risks for the markets to overcome in the near-term, another uptick in volatility would not be too surprising. Any regular investors unsure how to navigate this environment should consider working with a professional financial advisor and as always, we are here to help with any questions you may have.
To recap a few of the things we learned about the economy last week, the positives included that the nation’s trade deficit narrowed, home-purchase applications rose, small business borrowing rebounded, revolving credit growth firmed, service-sector activity continued to expand, consumer confidence jumped, corporate layoff announcements decreased, nonfarm payrolls growth surged, joblessness matched a half-century low, and the number of Americans making first-time claims for unemployment benefits fell to the best level since April. As for the negatives, construction spending unexpectedly declined, manufacturing hiring remained relatively weak, gauges of U.S. factory activity continued to send mixed signals, and measures of wage growth cooled, albeit from upward-revised levels. This week the pace of economic data slows down but there are still a few important reports on small business, retail sales, and inflation scheduled to be released, along with a potentially market-moving announcement on monetary policy from the Federal Reserve on Wednesday.
What To Watch:
- 3-Yr Note Auction 1:00 PM ET
- FOMC Meeting Begins
- NFIB Small Business Optimism Index 6:00 AM ET
- Productivity and Costs 8:30 AM ET
- 10-Yr Note Auction 1:00 PM ET
- MBA Mortgage Applications 7:00 AM ET
- CPI 8:30 AM ET
- Atlanta Fed Business Inflation Expectations 10:00 AM ET
- Quarterly Services Survey 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- FOMC Meeting Announcement 2:00 PM ET
- Fed Chair Press Conference 2:30 PM ET
- Jobless Claims 8:30 AM ET
- PPI-FD 8:30 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 5-Yr TIPS Announcement 11:00 AM ET
- 30-Yr Bond Auction 1:00 PM ET
Sources: Econoday, FRBSL
Post author: Charles Couch