The market dropped for the second straight week, as the Dow Industrials declined 114.82 points, or 0.4%, to 26,820.25; the S&P 500 fell 1%, to 2,961.79; and the technology-driven Nasdaq Composite Index gave back 2.2%. The Dow Transports also had a tough week down 1.1%, despite a $2.28/bbl. drop in oil prices. Small and mid-cap stocks – as seen in the Russell 2000 – were negative by about 2.5%. Indicative of ongoing caution, only utilities and consumer staples were in the green. With some concern that Elizabeth Warren is gaining support in the Democratic party, health care stocks tumbled 3.3% on average.
There were two major headlines this week that spooked traders: An impeachment inquiry into President Trump and reports that the White House might consider delisting Chinese companies from U.S. markets and limiting U.S. investments in China. The later had more of an impact on stocks than the impeachment news, which will probably go nowhere. The economy continues to give off mixed signals as we head into the final innings of 2019. On the plus side, we continue to see consumer strength with healthy gains in housing starts, building permits and a slight uptick in existing home sales. Add in rising auto demand and a positive assessment by the Federal Reserve on household spending and it would seem as though the public is still fully committed to the long business upturn. Conversely, industrial indicators are less positive, with capital expenditures and exports weakening amid lingering trade worries. Given this divided landscape, it seems likely that the nation will remain on a modest, but sustained, economic two percent growth track over the next few quarters.
Meanwhile, the market is showing some nervousness, which can be seen in the recent inability to secure new highs. Market technicals are casting concern with the S&P 500 creating a double top on the charts that will likely need higher corporate sales and profits to accelerate before picking up again. Also, the IPO market appears to be waning; not a promising omen. There are reasons to be both confident and a bit cautious at this point. However, as the fundamentals remain relatively strong, a positive, albeit conservative, equity holding stance still appears to be in order.
Here is the answer to last week’s trivia question: These well-known brands – Crisco, Milk-Bone, Knott’s Berry Farm and Folgers – are products of what company? Unilever, J.M. Smucker, Nestle or Procter & Gamble. Answer: Along with Meow Mix, Jif and its namesake jams and jellies – J.M. Smucker.
Today’s Trivia Question: Luxury leather and fashion accessory company Coach, Inc., together with its other brands, changed its name in October 2017 to? Miles Cahn & Co., The Leather Factory, Michael Kors or Tapestry.