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Positive Global Economic Data Drives Investor Optimism

Weekly Update – January 17, 2020

  • U.S. stocks capped another strong week with fresh record highs, as overall positive global economic data and a solid start to the earnings season drove investor optimism. For the week, the Dow Jones Industrial Average gained 1.8%, while the S&P 500 and the Nasdaq gained nearly 2% and 2.3%, respectively. With stocks rallying, U.S. Treasurys were mixed; the two-year yield eased 1 bp to 1.56% while the 10-year yield increased 3 bps to 1.84%.
  • With 8.8% of S&P 500 companies reporting third-quarter results, 70.5% have exceeded earnings per share expectations, while 65.9% have beaten revenue expectations. As of January 17, 2019, Refinitiv estimated the S&P 500 index’s fourth-quarter earnings growth rate at -0.8% and its 12-month forward P/E ratio at 18.8. Bank of America, JPMorgan and Morgan Stanley impressed, whereas Wells Fargo, Alcoa and Boston Scientific disappointed.
  • December housing starts increased 16.9% from November to 1.61 million, beating estimates of a 0.5% increase to 1.38 million, logging the largest gain since December, 2006.
  • Core retail sales in December increased 0.5%, beating the 0.4% expected and erasing the 0.2% decline in November.
  • December’s headline month-over-month CPI of 0.2% was below the 0.3% consensus but the 2.3% year-over-year gain was higher than November’s 2.1%.
  • The Philly Fed January business outlook index surged, coming in at 17 versus the 3.8 consensus and 2.4 in December. Furthermore, January’s 4.8 Empire State manufacturing survey reading beat the estimate of 3.55 and came in stronger than December’s 3.3.
  • Weekly initial jobless claims of 204,000 for the week ending January 11 beat consensus of 216,000. However, employers posted only 6.8 million new jobs in November, short of 7.2 million expected and down from the 7.4 million in October.
  • Boeing said it found last week a new software issue that must be resolved before the 737 MAX can return to service. Boeing had hoped to schedule a certification flight with the FAA by the end of January, but that may now be pushed into at least February.

CPWM Weekly Market Monitor (2020.01.17)

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