Weekly Update - November 02, 2018
- Global stock markets advanced during a volatile week, but gave back some gains on Friday as technology stocks took another beating — this time because of disappointing guidance from Apple. Trade headlines and an upside hiring surprise notwithstanding, corporate earnings showed that business fundamentals remained strong. The U.S. dollar slid against the major currencies for the week. The 10-year U.S. Treasury yield rose from 3.08% to nearly 3.22%; compared to a year ago, the yield curve rose more on the short end than the long. Gold prices fell with higher Treasury yields. Oil prices declined for the week on overproduction concerns, despite imminent sanctions against Iran.
- With 74% of S&P 500 companies reporting third-quarter results, 78% have exceeded earnings per share (EPS) expectations, while 61% have beaten sales expectations. As of November 2, 2018, FactSet estimated the S&P 500 index’s third quarter earnings growth rate at 24.9% and its 12-month forward P/E ratio at 15.6, below the five-year average of 16.4, but above the ten-year average of 14.5. Under Armour impressed as 3Q earnings beat expectations and the company raised FY18 guidance. General Electric disappointed as EPS missed and the company cut its dividend. General Motors and T-Mobile also impressed, whereas Kellogg and Wayfair disappointed.
- The Labor Department reported that U.S. nonfarm payrolls increased by 250,000 in October, well ahead of economists’ expectations for 188,000 new jobs. Average hourly earnings increased 3.1% year-over-year, the greatest wage gain since 2009. The unemployment rate held steady at 3.7%, its lowest level since December 1969. The labor-force participation rate rose from 62.7% in September to 62.9%, up from a 2015 low of 62.3% but just slightly above multi-decade lows.
- The Conference Board reported that October consumer confidence came in at 137.9, better than September’s 135.3. The release noted a gain in consumer expectations, suggesting respondents are looking for the strong pace of growth to continue into 2019.
- The ISM manufacturing index registered 57.7 in October, below September’s reading of 58.9. Respondent comments reflected high demand and cost pressures attributed to trade issues. The Dallas Fed manufacturing survey was up 1.3 points to 29.4.