As a volatile November came to an end, a hopeful easing of trade tensions, strong weekend holiday sales and dovish comments by Fed Chair Jerome Powell sent equities nicely higher. The first two trading days of the week saw a 463-point gain in the Dow Industrials and on Wednesday, following the Powell remarks, the average soared nearly 618 points. Traders again jumped in on Friday as hopes for positive news from the all-important trade meeting at the G20 between Presidents Trump and Xi on Saturday added to the mood. For the week, the Dow managed a 1,253-point gain or nearly 5.2%. The S&P 500 rose by 4.9% and the Nasdaq Composite was up 5.6%, as technology stocks came out of hiding. It was the best week for these two indexes since the end of 2011. Bidding in tech was broad with the sector moving forward by 6.3% followed by health care names and consumer stocks. All sectors were in the green and fickle crude oil prices stabilized at about $51/bbl. ahead of this week’s OPEC gathering.
The jury is still out on the weekend meeting between the U.S. and China on trade, but early indications have been positive. At the Economic Club of New York, Federal Reserve chair Powell signaled that interest-rate levels were already near neutral. While a rate-hike this month is still likely, next year may see only two more increases in the Fed Fund’s rate compared to earlier indications of possibly three or more. Powell will testify this week in Congress on the outlook of the economy and may further clarify his thinking on the Fed’s rate outlook. Why the shift in monetary policy? A few clouds are appearing on the economic horizon. Specifically, we’ve seen a drop in durable goods orders, smaller gains in the leading indicators and a dip in consumer confidence. And drastically lower oil prices have helped curb some inflation worries, too.
The uneven market action over the past several months reflects the choppy economic backdrop, with generally sound fundamentals at home offset by lingering concerns overseas. For now, this suggests staying the course, while retaining a watchful eye on developments.
Finally, our country lost a hero this week with the death of our 41st President, George H. Bush. He believed in community activism, served our country nobly and made our world a better place. He will be missed.
Here is the answer to last week’s trivia question: According to investment services firm Edward Jones, holiday sales will increase 5% from last year. Barron’s predicts consumers will spend about how much on average over the upcoming holidays? $395, $472, $533 or $658. Answer: $658.
Today’s Trivia Question: What do the following brands have in common: Hidden Valley Ranch, Burt’s Bees, Kingsford Charcoal and Liquid-Plumr? Made in Mexico, products of the Clorox Co., privately held or no longer available at Dollar General Stores.