Equities appear to be in a directionless mood these days, with any signs of a breakout followed by selling and market weakness followed by bidders seeking bargains. Traders are having a rough go of it as they look for any headline news out of Washington as a reason to pounce. Strong growth in labor and manufacturing are tossed against White House re-shuffling and the prospect of tariff wars with our trading partners. For the week, the Dow headed lower in early trading sending the average down over 577 points followed by a 188 point gain late in the week. In all, stocks were lower by about 1%. Safe-haven utilities saw a nice comeback posting the only sector gain for the week at 2.6%. Basic material stocks (chemicals, paper, metals, etc.), were the hardest hit falling 3.3%.
The moderating wage gains of last week’s labor report may not have swayed the Federal Reserve as yet, as the central bank is widely expected to raise interest rates at its FOMC meeting on Wednesday. Longer term, though, the more subdued wage trend, if sustained, could entice the Fed to move forward more cautiously on the rate front. Also seen is a lesser increase in consumer prices, with much of that deceleration due to a recent drop in the price of oil and a flattening out in food and medical costs. In sum, most inflation indicators, while trending higher (especially in apparel and transportation), are still relatively subdued from an historical standpoint.
It looks like the market’s gyrations will continue for a while, thus keeping the level of anxiety (and volatility) high, even if stocks eventually resume their upward track and close out the year on a positive note. Earnings, a key driver of stock prices, have been good as has guidance for future quarters. On Monday, we will hear from Oracle Corp. with third quarter earnings of $0.72 vs. last year’s $0.69. The economic and profit news has been sufficiently positive to counter at least some of the concerns about inflation, interest rates, possible trade wars and the ongoing personnel changes in the Trump Administration. Investors are better off looking at the long-term and less at hourly headlines.
Here is the answer to last week’s trivia question: Which product is not produced by Colgate-Palmolive Co.? Tom’s of Maine, Ajax, Murphy’s Oil Soap or Colgate Shaving Cream. Answer: Colgate Shaving Cream. Colgate discontinued the product some years ago, but vintage cans still exist on Amazon and eBay.
Today’s Trivia Question: M&T Bank was founded in 1856 in Western New York. The “M&T” originally stood for? Monetary & Trust Bank, Manufacturers and Traders Trust, Maxwell and Tyler or Metropolitan and Tioga Bank.