ND&S Weekly Commentary 10.22.18 – Play Ball!

October 22, 2018

Market volatility continued last week as gains from Tuesday’s big rally were washed away as the week progressed. For the week, the DJIA closed higher by 0.45% while the broader-based S&P 500 finished up a modest 0.05%. Smaller companies representing the Russell 2000 closed lower by 0.29%. International equities also finished in the red with the MSCI EAFE and MSCI EM down .06% and .88%, respectively. Treasury yields pushed higher across the board as anticipation of additional Fed action grew. The 10yr US Treasury closed the week at a yield of 3.20%, up from 3.15% the week prior.

The equity markets and economy appear to be experiencing a bit of indigestion over the past few weeks. Economic data for the week, again, was a little soft. Retail sales rose 0.1% in September, less than an expected 0.5% increase. Industrial production rose 0.3% in September coming in slightly ahead of estimates. Housing starts fell 5.3% month over month to a seasonally adjusted 1.201M missing estimates. Housing starts is one of economist’s favorite leading indicators as it can offer a timely glimpse into the health of an economy. This week’s economic releases include reports on durable goods orders, manufacturing, consumer sentiment, and the 1st estimate of 3Q GDP.

Earnings season is well underway, and so far has been relatively positive versus expectations. 75% of companies have posted above expected earnings per share with y/y growth having increased to 24%. Revenues are up 7.6%, which is slightly below expectations and warrant monitoring. This week, 202 companies in the S&P 500 are scheduled to report. We will be watching earnings reports closely this week especially Amazon AMZN, Alphabet GOOGL, Verizon VZ, and Merck MRK to name a few.

We anticipate volatility to remain present through the remainder of earnings season and through the mid-term elections. For clients, be on the lookout for Q3 reports and our 3rd Quarter newsletter titled Fed Up.

Let’s Go Red Sox!

“Baseball is the only field of endeavor where a man can succeed three times out of ten and be considered a good performer.” – Ted Williams