NDS Weekly Commentary 10.14.19 – Earnings Reports Begin

October 14, 2019

Equities finished last week on a positive note as U.S. markets rallied Friday on news that the U.S. and China had reached a truce on trade. Washington announced Friday that it would postpone planned increases in tariffs and China said it would increase purchases of U.S. agricultural products with hopes that more details could be worked out in the months ahead. In response, the DJIA traded up 319 points on Friday and for the week the DJIA, S&P 500 and NASDAQ advanced 0.93%, 0.66% and 0.94%, respectively. International markets were also strong last week with the MSCI EAFE jumping 2.31% and emerging markets closing up 1.53%. In addition to positive news on trade, core CPI rose a modest 0.1% and consumer sentiment numbers improved. With better news on trade, the materials and industrial cyclical sectors were strongest for the week and the defensive sectors of utilities and consumer staples were the weakest. Conversely, fixed income markets declined with the rate on the 10 year U.S. Treasury soaring to 1.76% from 1.52% during the week. This week look for economic reports on retail sales, housing starts and industrial production.

Earnings season starts in earnest this week with major banks, Johnson & Johnson, Coca Cola and others scheduled to release earnings. Consensus earnings expectations for the 3rd quarter are forecast to decline as much as 4.3%, however, if you factor in stock buybacks and the tendency of companies to beat forecasts, earnings are likely to come in better than anticipated. We believe the economy will continue to grow modestly and that the Fed will continue to be supportive with a 0.25% rate cut at their December meeting.

“But he that dares not grasp the thorn Should never crave the rose.” – Anne Bronte