The past week was tough for stocks as the Federal Reserve hiked interest rates, although not unexpected, and the tit-for-tat with China on trade continued. The Dow Industrials took a breather and gave back about one percent, while the S&P 500 fell about half as much. A strong technology sector paved the way for the Nasdaq Composite to tack on about .75%. Indeed, tech stocks were the strongest market group with a 1.3% advance, followed by energy as West Texas crude oil continues to rise. Oil settled on Friday at $73.25/bbl., higher by $2.77 for the week. On the negative side of the ledger, financials continued to fall and the sector was down over 3% on average, edging out basic material plays, which declined over 4% on tariff worries.
While the Fed raised short-term rates by a quarter point, the less accommodative stance is probably warranted as the economy – and inflation – heat up. U.S. consumer confidence hit an 18-year high in September, despite the ongoing trade tensions. The economy probably can handle another hike in December, with recent data on the leading indicators, consumer confidence and new home sales all signaling that business remains on a fast track. In all, GDP, up a strong 4.2% in the second quarter, likely advanced by 3.5%, or better, in the just-ended three months. Hence, the central bank’s gradual monetary tightening approach should yield needed monetary stability.
Over the weekend, the U.S. and Canada reached a tentative trade agreement, which will most likely seal the deal along with Mexico on a new NAFTA. The administration is also playing nice with South Korea and Japan on trade issues and European Union tariffs may soon get resolved to some degree. That leaves China as the odd man out and seeing that the President is not backing away from his fair-trade promises, talks toward some sort of resolution may continue. Behind the market’s overall resilience is the confidence prompted by the continuing business expansion and the sustained profit upturn. All things considered, the investment picture looks relatively promising.
Here is the answer to last week’s trivia question: General Motors was initially formed in 1908 with its Buick Brand. The company went on to acquire other car manufactures to form the world’s largest auto company of its time. What was the last car brand added to the company’s line? Pontiac, Chevrolet, Cadillac or Oldsmobile. Answer: Chevrolet, which merged into GM in 1916.
This Week’s Trivia Question: The largest selling prescription drug worldwide is Humira for the treatment of rheumatoid arthritis, Chron’s disease, psoriasis and other indications. The drug is manufactured and sold by what pharmaceutical company? AbbVie, Pfizer, GlaxoSmithKline or Merck.