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Weekly Update – January 25, 2019

  • Stock markets had mixed results during a holiday-shortened trading week. Asian and European bourses saw mixed results; U.S. markets achieved slight gains. Investors worried that China’s economic growth had marked its slowest pace in nearly 30 years and that manufacturing activity had slackened in the Eurozone and Japan, while weighing the persistent uncertainties of the partial U.S. government shutdown and trade tensions. But investor sentiment was lifted by positive 4Q18 earnings, and by a report that the Federal Reserve might soon end its unwinding of QE holdings, retaining a larger than expected portfolio of U.S. Treasury securities.
  • Oil prices fell modestly, tugged by factors such as reduced Canadian output, rising U.S. inventories and supply uncertainty from Venezuela. Gold prices slipped. U.S. Treasurys yields fell; the 10-year yield ended the week at about 2.76%. The U.S. dollar declined.
  • With 22% of S&P 500 companies reporting fourth-quarter results, 71% have exceeded earnings per share (EPS) expectations, while 59% have beaten sales expectations. As of January 25, 2019, FactSet estimated the S&P 500 index’s fourth-quarter earnings growth rate at 10.9% and its 12-month forward P/E ratio at 15.4, below the five-year average of 16.4 but above its ten-year average of 14.6. Comcast, Halliburton and Procter & Gamble impressed this week, whereas Abbott Laboratories, Capital One Financial and Kimberly-Clark disappointed.
  • The IHS Markit Flash Manufacturing PMI rose in January to 54.5, its highest level since last May. The report noted faster expansion of production, new orders and stocks of purchases.
  • Initial jobless claims fell to 199,000 for the week ended January 19, the lowest reading since 1969. The four-week average decreased by 6,000 to 215,000.
  • The National Association of Realtors said existing home sales for December fell 6.4% to 4.99 million versus November’s 5.32 million.
  • Japanese manufacturing PMI dropped to 50.0 in January, straddling the borderline between expansion and contraction; production scaled back for the first time since July 2016. Eurozone Manufacturing PMI dropped to 50.5, in January, down from 51.4 in December and a 50-month low. China’s industrial production beat estimates, but its economy grew only 6.6% in 2018.

CPWM Weekly Market Monitor (2019.01.25)

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