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Market Summary

U.S. equities moved broadly higher for the sixth consecutive week, the longest positive streak in about 2 years, according to FactSet. The S&P 500, Dow Jones, and Nasdaq Composite all notched new record highs with gains of 0.9%, 1.2%, and 0.8% for the week, respectively. A rebound in U.S. retail sales contributed to the growing positive sentiment behind recent stock gains, in addition to better than expected corporate earnings reports. However, mixed signals on the progress of the U.S.-China trade conflict tempered optimism and drove some investors to safe haven assets like U.S. Treasury bonds with the 10-year Treasury yield falling 0.10% to 1.83% last week on rising demand.

Third quarter corporate earnings season is nearly in the books with over 92% of S&P 500 companies having reported results. While the reported earnings growth for the index constituents of -2.4% over the prior year has beaten expectations of a -3.7% decline, that marks the third consecutive quarterly earnings decline compared to 2018, which was a high bar due to the boost from tax stimulus. Additionally, corporate earnings growth estimates for next year continue to slide lower as the expected growth for the S&P 500 has fallen to 9.5% from over 11.0% at the end of June, according to FactSet.

Despite slowing earnings growth and the ongoing trade headwinds, Federal Reserve Chairman Jerome Powell told lawmakers last week that the U.S. economy remains in a solid position thanks in large part to the strong domestic consumer. This assertion was bolstered by Friday’s retail report of a 0.3% increase in sales in October and a strong earnings report from Walmart on Thursday. Powell also indicated that he saw no reason to cut rates further in the short term as long as inflation remains in-check.

In the week ahead, market participants will sift through released minutes from the most recent Federal Reserve meeting and updated data on consumer confidence and manufacturing. Much of the focus will also remain on the U.S.-China trade talks and updates on the civil unrest in Hong Kong, which has been pushed to the verge of an economic recession by the recent riots.

Economic Highlights

  • Inflation: The U.S. Consumer Price Index (CPI) rebounded up to 1.8% year-over-year in October from 1.7% in September driven by an uptick in gasoline, medical care, and food prices. Core CPI (excluding energy and food prices) was up 2.3% over the prior year, down from 2.4% in September.

  • Industrial Production: The manufacturing sector continues to struggle as October’s industrial production fell -0.8% compared to September and missed consensus expectations for a decline of -0.4%.

US Economy – The Week Ahead

Tuesday, 11/19/2019

  • Housing Starts – Consensus Estimate: 1,320K (5.1% MoM), Prior Month: 1,256K (-9.4% MoM)

Wednesday, 11/20/2019

  • Federal Open Market Committee (FOMC) October meeting minutes released

Thursday, 11/21/2019

  • Initial Jobless Claims – Consensus Estimate: 216,000 (-4.0% WoW), Prior Week: 225,000 (6.6% WoW)
  • Existing Home Sales – Consensus Estimate: 5,490K (2.0% MoM), Prior Month: 5,380K (-2.2% MoM)
  • Leading Economic Indicator Index (Month-over-Month) – Consensus Estimate: -0.1%, Prior Month: -0.1%

Friday, 11/22/2019

  • University of Michigan Consumer Sentiment Survey (Final) – Consensus Estimate: 95.7 (0.2% MoM), Prior Month: 95.5 (2.5% MoM)

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