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By Pete Biebel, Senior Vice President

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It was another week in which the market was primarily influenced by the trade talks.  The mix of headlines and rumors and tweets seemed to be the only potion that was able to cast any spell on the markets.  Wall Street continues to ignore the drama of the impeachment hearings, preferring, at least for the time being, to treat the unfolding spectacle as make believe.

It all resulted in another relatively sleepy week for stocks.  The dullness was interrupted mid-week by a brief but steep sell-off following news that the hoped-for progress in trade negotiations was an illusion.  The forty-five-minute decline that ensued dwarfed all the other intra-day swings last week.  The emanations from the impeachment hearings might have been a poison apple for the markets, but stocks seemingly chose to ignore the news, neither sanguine nor cynical, just sorta grumpy.  Happy showed up Friday morning, when tweets of trade progress magically produced a gap-up opening.

While Friday brought a fairy-tale ending, the major averages all had small net losses for the week.  The Dow Jones Industrial Average (DJIA) slipped almost one-half of one percent.  The S&P 500 Index (SPX) gave back one-third of one percent and the NASDAQ Composite Index (COMP) lost one-quarter of one percent.   All three of the indices failed to extend their streaks of multi-week gains.

Among the U.S. equity sectors, Healthcare was again the fairest one of all.  That sector climbed 0.85% for the week led higher by a 3.5% gain in the NASDAQ Biotechnology Index and a 3.3% gain in the S&P Pharmaceuticals Index.  With last week’s outperformance, Healthcare now leads all other sectors with a five-week gain of a little over 7%.  The Technology sector, which had been the early leader in the October/November rally, lost about three-quarters of one-percent last week and now trails Healthcare in its five-week return by just a handful of basis points.

Among the top performers last week were several fixed-income groups.  Declining interest rates helped long-term Treasuries, TIPs and Investment Grade Corporate Bonds all post small gains for the week, outperforming everything except Healthcare.  The lower rates were driven by two primary factors.  The most significant of those was the Fed’s continuing liquidity injections in the form of hundreds of billions of dollars in short-term repos.  The second factor was that hopes for continuing economic growth may be losing their charm.  The Atlanta Fed reported that its GDPNow indicator, which had been projecting growth at a 1% for the fourth quarter earlier this month, now expects just 0.4% growth.

The mid-week weakness saw SPX test the 3100 level several times.  The selling pressure was unable to press SPX below that level by much or for long.  The index spent most of the second half of the week in a relatively narrow range between 3100 and 3110.  Last week’s sideways trading helped to dispel a bit of the market’s short-term over-bought condition, but still, the averages have come a long way in a short time.  Call me dopey, but significant additional upside seems unlikely over the next few weeks.

These holiday-shortened weeks typically have an upward bias.  We’re likely to see very low volume on Wednesday and perhaps the lowest daily volume of the year on Friday.  But, low volume doesn’t necessarily mean low volatility.  In fact, markets could see some unusual volatility in the thin sessions late in the week.

Date Report Previous Consensus
Monday 11/25/2019 Chicago Fed National Activity Index -0.45 -0.20
  Dallas Fed Manufacturing Survey, General Activity -5.1 -2.5
Tuesday 11/26/2019 International Trade in Goods, Trade Deficit $70.4B  $70.0B
  S&P Case-Shiller Home Price Index, M/M -0.2%  +0.3%
  New Home Sales, SAAR 701K  707K
  Consumer Confidence 125.9  126.8
  Richmond Fed Manufacturing Index 8  6
Wednesday 11/27/2019 Durable Goods Orders, M/M -1.1%  -0.7%
  Durable Goods Orders, ex-Transportation, M/M -0.3%  +0.2%
  Real GDP, Q/Q, SAAR +1.9%  +1.9%
  Jobless Claims 227 K  219K
  Personal Income and Outlays, Income, M/M +0.3% +0.3%
  Personal Income and Outlays, Spending, M/M +0.2% +0.3%
  Pending Home Sales, M/M +1.5% +1.5%
Thursday 11/28/2019 Thanksgiving Day – Markets Closed    
Friday 11/29/2019 Chicago PMI, Business Barometer Index 43.2 46.0


 

Links to previously published commentaries can be found at benjaminfedwards.com/For Our Clients/Educational Resources/Market.

November 25, 2019 |