Archive for ND&S Updates

ND&S Weekly Commentary 11.25.19 – Trade Comes Back Into Focus

November 25, 2019 

Equities finished the week modestly lower as trade came back into focus. President Trump appears reluctant to reduce tariffs without further concessions from China. On Friday, Chinese President Xi Jinping sounded hopeful the sides could reach a “phase one” trade deal with the U.S. that is based on “mutual respect and equality”. Complicating matters is a bi-partisan bill supporting pro-democracy activists in Hong Kong that was passed by the Senate and House and is awaiting the President’s signature. Beijing has voiced displeasure with the bill. Thus far, they have kept the issue in Hong Kong separate from trade talks, however, that could change the longer the trade issue carries on.

The S&P 500, DJIA, and Nasdaq were all negative on the week as they finished down 0.29%, 0.41%, and 0.20%, respectively. International equities also finished lower with the MSCI EAFE off 0.57% and emerging markets down fractionally. Bonds were positive on the week with yields moving lower. The 10 Year US Treasury closed at a yield of 1.77%. Gold prices continued to hover around the $1,470/oz level. Oil prices rebounded last week closing at $57.88/barrel, the highest level in 2 months.

Economic data released last week was mixed. U.S. housing starts advanced 3.8% month over month in October which came in slightly below expectations. However, existing home sales advanced 1.5% in October which beat expectations. Flash purchasing managers’ indices (PMIs), released on Friday, showed that the global manufacturing sector continued to stabilize with improved readings in the US, Europe and Japan. The upcoming holiday-shortened week includes economic data reports on 3Q19 real GDP (2nd estimate), trade balance, durable goods orders, and personal consumption expenditure (PCE/Core PCE).

Best wishes for a Happy Thanksgiving!

“Vegetables are a must on a diet. I suggest carrot cake, zucchini bread, and pumpkin pie.” Jim Davis

Weekly Commentary (11/18/19) – Déjà vu – Another Weekly Gain

November 18, 2019 

Markets advanced last week on renewed optimism for progress on trade, better than feared earnings reports and confirmation that the U.S. consumer remains in good shape. Headline news surrounding the impeachment process seemed to be dismissed by the markets. After all – It’s the economy, stupid – as James Carville, Bill Clinton’s campaign strategist in 1992, aptly said.

For the week, the DJIA advanced 1.37% while the S&P 500 gained 0.93%. Noteworthy is the fact that the DJIA breached 28,000 for the first time ever while the S&P 500 notched its sixth straight week of gains. The volatile Nasdaq added on 1.11%. Developed international markets moved higher, albeit at a slower pace. For the week, the MSCI EAFE index gained 0.54% while emerging market equities (MSCI EM) jumped 1.50%. Small company stocks, represented by the Russell 2000, finished ahead by 0.63% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week higher as investors continued to flee to the perceived safety of bonds. As a result, the 10 YR US Treasury closed at a yield of 1.83% (down ~11 bps from the previous week’s closing yield of ~1.94%). Gold prices closed at $1,467.30/oz – up 0.41% on the week. Oil prices jumped $0.48 (or 0.84%) last week as oil remains range bound due to sufficient supply and tepid demand.

Economic news released last week was mixed. On Wednesday, the U.S. Bureau of Labor Statistics (BLS) announced that the Consumer Price Index (CPI) advanced 0.4% in October and 1.8% year-over-year. On Thursday, the BLS reported that the Producer Price Index (PPI) advanced 0.4% in October, ahead of expectations for a 0.3% advance. The PPI advanced 1.1% year-over-year. Neither the CPI nor PPI point to unreasonable or out of control inflation, and this gives the Fed more time to remain accommodating. On Thursday, the Department of Labor reported that initial jobless claims for the week ending November 9 were 225,000, slightly above expectations of 215,000. The labor market remains quite resilient, and jobless claims remain under the 300,000 threshold for the longest streak of weekly records for data reaching back to 1967. On Friday, the U.S. Commerce Department reported that retail and food-service sales moved ahead by 0.3% in October, ahead of expectations for a 0.2% advance. While the consumer remains in good shape, industrial production continues to be challenged. October industrial production fell 0.8% while consensus was for a 0.4% decline. No doubt, lack of clarity on a trade deal is holding back industrial production.

We would not be surprised if the markets paused for a while given the market’s healthy advance over the past month. We suggest investors stay close to their long-term target asset allocations with a slight defensive bias.

“Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence.”Helen Keller

ND&S Weekly Commentary 11/11/2019 – Happy Veterans Day

November 11, 2019 

U.S. stocks reached fresh record highs last week as investors’ hopes for a China trade deal rose. The DJIA, S&P 500, and NASDAQ were up 1.4%, 0.9%, and 1.1%, respectively. International markets were also positive as developed markets (MSCI EAFE) advanced 0.5% and emerging markets (MSCI EM) 1.5%. Consumer spending and jobs data as well as corporate profits that have exceeded expectations have tempered fears of an economic slowdown. So far, 72.5% of companies reporting surpassed earnings per share (EPS) estimates while 57.9% beat on revenues. As a result, cyclical stock sectors were the best performers for the week with financials, energy, and materials making the biggest moves. This week look for economic reports on CPI, retail sales and industrial production.

In fixed income, U.S. government bond yields had their biggest weekly advance in yields in a month. The 10 year U.S. Treasury note ended the week at 1.93%, its highest rate since July 31st. The yield curve is no longer inverted (as shown in the chart below from the Wall Street Journal). This week all shorter dated treasuries yielded less than longer ones for the first time since November 2018 helping to relieve concerns about a possible recession.

On this Veterans Day, we thank all those who have honorably served our great nation. We are especially grateful for all those service members who never returned home as we are reminded of the inscription on the Tomb of the Unknown Soldier – “Here rests in honored glory an American soldier known but to God”

NDS Weekly Commentary (11.4.19) – Trick or TREAT – S&P 500 and NASDAQ reach all-time highs

November 4, 2019 

It was a record setting week on Wall Street as stocks rallied towards all-time highs. Despite the impeachment drama, a Federal Reserve interest rate cut, better-than-expected October jobs report, and reasonable corporate earnings fueled investor’s enthusiasm. On Friday, China announced it reached a consensus with the U.S., in principle, on the first phase of a trade deal.

For the week, the DJIA increased 1.4%, the S&P 500 rose 1.5%, and the tech-heavy NASDAQ rose 1.7%. International equities were also stellar with developed markets (MSCI EAFE) up 1.2% while emerging markets (MSCI EM) increased 1.3%.

As widely expected, the Federal Reserve reduced the federal funds rate by 0.25% and Chairman Powell said that further increases would only come after there is evidence of an uptick in inflation which is now close to 2%. The yield on the 10 year U.S. Treasury declined from 1.80% last week to 1.71%.

Last month, 128,000 jobs were added in spite of 50,000 GM workers out on strike, which far exceeded the 89,000 consensus estimate. This provided an improved outlook for consumer spending and support for the slowing economy.

According to FactSet, 3/4 of companies have reported 3rd quarter earnings, with 76% of S&P 500 companies beating estimates. The best weekly sector performance was healthcare which was up 3.05%. There will be a slew of corporate earnings released this week. On Monday, durable goods will be reported, the services Purchaser’s Managers Index (PMI) on Tuesday, and consumer sentiment on Friday.

“Don’t give up on your dreams, or your dreams will give up on you.” – John Wooden