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Weekly Update – November 01, 2019

  • Stocks started November on an upbeat note, with the S&P 500 closing at a new record to cap a fourth week of gains. Regarding market catalysts, three was the magic number: progress in China—United States trade talks, a third 25-basis point interest-rate cut from the Federal Reserve and a Friday job report that beat expectations.
  • The jobs data suggested the U.S. may be in a so-called “Goldilocks” economy: strong enough to ease recession fears, but not strong enough to heighten fears of inflation. Market sentiment lifted, and volatility eased after an upswing on Thursday. Asian and European bourses were down or flat for the week.
  • Investors also bought bonds, satisfied with Fed reassurances that rate cuts were on hold and hikes probably distant. The yield on the ten-year U.S. Treasury fell through the week, but closed up at 1.73%. Oil prices declined, whereas gold prices rose. The U.S. dollar fell against a basket of major currencies.
  • With 71.2% of S&P 500 companies reporting third-quarter results, 75.8% have exceeded earnings per share expectations, while 59.2% have beaten revenue expectations. As of November 1, 2019, Refinitiv estimated the S&P 500’s third-quarter earnings growth rate at -0.8% and its 12-month forward P/E ratio at 17.5. Cooper Tire, General Motors and Spotify Technology impressed, whereas Deutsche Bank, Shopify and YUM! Brands disappointed.
  • October nonfarm payrolls rose by 128,000 jobs, well ahead of estimates for 89,500 despite the strike at GM. Unemployment rose slightly to 3.6%; labor force participation ticked up to 63.3%. Average hourly earnings increased 0.2% up from 0.0% in September.
  • October manufacturing data disappointed: ISM manufacturing read 48.3, up from September’s 47.8; final Markit manufacturing PMI ticked down to 51.3, still above September’s 51.1 reading; Chicago PMI fell to 43.2. China’s official PMIs contracted for the sixth straight month.
  • Third quarter U.S. GDP logged a 1.9% annual rate versus 2Q19’s 2.0% pace. Personal consumption expenditures rose 2.9% but investment in structures and equipment saw the sharpest decrease in three years.
  • The National Association of Realtors said September pending home sales rose 1.5%, suggesting sales could rise in coming months.

CPWM Weekly Market Monitor (2019.11.01)

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