Market Recap - Strong Jobs Report Helps S&P 500 Erase Weekly Losses

The S&P 500 Increased 0.2% In A Choppy Week Of Trading, As A Strong November Employment Helped The Broader Market Overcome A Rough Start. The Russell 2000 Rose 0.6%, While The Dow Jones Industrial Average (-0.1%) And Nasdaq Composite (-0.1%) Were Unable To Recoup All Their Losses. 

This week's leaders included the S&P 500 energy (+1.5%), consumer staples (+0.9%), health care (+0.9%), and financials (+0.7%) sectors. The industrials (-1.1%), consumer discretionary (-0.8%), information technology (-0.4%), and real estate (-0.3%) sectors finished lower. 

The week began with the S&P 500 dropping about 70 points, or 2.3%, from its Friday closing level in less than two sessions. The two primary catalysts were a weaker-than-expected ISM Manufacturing Index for November and President Trump suggesting that a trade deal with China might be better if it waited until after the 2020 election. 

The news might have been good excuses to take some profits after a great month of November (and year), but an opportunistic mindset quickly took fold. Risk sentiment was first supported by reports that trade talks are nearing a deal and was later buoyed by a stronger-than-expected November employment report. 

Nonfarm payrolls climbed 266,000 (Briefing.com consensus 182,000), firmly beating expectations and coming in above the upwardly revised readings for October and September. The unemployment rate ticked down to 3.5% (Briefing.com consensus 3.6%), and average hourly earnings increased 0.2% (Briefing.com consensus 0.3%). 

On Friday, China added to the upbeat trade mood after it said it began to exempt some U.S. agricultural purchases from tariffs. On a related note, tariffs on steel and aluminum imports from Argentina and Brazil were restored after the countries devalued their currencies, while $2.4 billion of French imports may be taxed up to 100% after France passed a digital tax law that allegedly targets U.S. tech companies.

Separately, there were some notable corporate leadership changes.

Alphabet's (GOOG) CEO Larry Page and President Sergey Brin stepped down from management and ceded CEO duties to Sundar Pichai in addition to his current CEO role at Google. Expedia's (EXPE) CEO Mark Okerstrom and CFO Alan Pickerill resigned at the board's request. United Airlines (UAL) CEO Oscar Munoz will step down in May and transition to Executive Chairman.

U.S. Treasuries had some big swings but ultimately finished near their unchanged marks from last week. The 2-yr yield increased two basis points to 1.63%, and the 10-yr yield increased one basis point to 1.84%. The U.S. Dollar Index fell 0.6% to 97.68. WTI crude climbed 7.3% to $59.20/bbl, as OPEC+ agreed to cut oil production by 500,000 barrels per day during the first quarter of 2020.

Market Recap - Fresh Records Set During Thanksgiving Week

The major averages ended the Thanksgiving week with solid gains across the board. The strong showing lifted the Dow, Nasdaq, and S&P 500 to fresh record highs while the Russell 2000 climbed to its best level since October 2018.

Trade-related headlines continued pouring in during the early portion of the week, but once again, they did not introduce anything material into the discussion. More notably, President Trump signed the Hong Kong Human Rights and Democracy Act on Wednesday evening, prompting some angry statements, but nothing more concrete, from Chinese officials.

Global economic data continued painting a gloomy picture, as China’s industrial profits decreased at the sharpest rate in eight years in October while South Korea (actual -1.7% m/m; expected 0.1%) and Japan (actual -4.2% m/m; expected -2.1%) reported falling industrial production in October.

Ten out of eleven sectors ended the week with gains, and five out of ten gained 1.0% or more. The consumer Week Ending 11/29/19 discretionary sector was the top performer, rising 1.8%. The group finished in the lead even though Telsey Advisory Group cautioned that store traffic on Thursday and Friday was likely down a touch when compared to last year.

The energy sector (-1.6%) was the only notable decliner of the week as the price of crude oil slid back below its 50-day moving average.

Market Recap - S&P 500 Snaps Six-Week Winning Streak

The S&P 500 Snapped A Six-Week Winning Streak, Although It Declined Just 0.3% This Week. The Dow Jones Industrial Average (-0.5%), Nasdaq Composite (-0.3%) And Russell 2000 (-0.5%) Performed In-Line With The Benchmark Index This Week, Reflecting A Broad-Based Lack Of Conviction. 

The week began with the large-cap indices closing at incremental record highs on Monday, but stocks ultimately struggled for direction the rest of the week. The S&P 500 materials (-1.7%) and real estate (-1.2%) sectors lost more than 1%. The health care (+0.8%), financials (+0.5%), and utilities (+0.2%) sectors finished higher. 

Trade headlines remained a part of the equation, of course. Receiving the most attention was a Reuters report that briefly unnerved the market by suggesting a deal may not be completed this year. There was still no sustained pullback effort, though, as the consensus view was that some sort of deal is still likely. 

As for the Dec. 15 tariffs, a report out of China had suggested that they could get delayed even if a deal isn't reached, but a FOX Business reporter said that they are still planned. Complicating the situation was the U.S. Senate passing the Hong Kong Human Rights and Democracy Act, which unsurprisingly drew the ire of Beijing. Chinese President Xi called for mutual respect and equality moving forward.

Back to stocks, retailers remained on the path of divergence after this week's batch of earnings reports. Home Depot (HD) and Kohl's (KSS) were some notable disappointments, while Target (TGT), Lowe's (LOW), and Nordstrom (JWN) were some notable winners. The SPDR S&P Retail ETF (XRT) declined 2.3% this week. 

Separately, Charles Schwab (SCHW) began talks to acquire TD Ameritrade (AMTD) for a reported $26 billion in a move that would help consolidate a disrupted industry. Shares of both companies climbed about 8% and 16%, respectively.

The U.S. Treasury market experienced some curve-flattening activity this week. The 2-yr yield increased two basis points to 1.63%, while the 10-yr yield declined six basis points to 1.77%. The U.S. Dollar Index increased 0.3% to 98.26. WTI crude increased 0.2%, or $0.13, to $57.88. 

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.