Trade anecdotes, Brexit baby steps, and corporate earnings were enough to push equity markets to a third consecutive week of gains last week while treasury yields and commodities continued their move higher. The S&P 500 briefly touched a new all‐time high on Friday, driven by energy, industrials, and technology shares. Rate sensitive utilities, REITs, and communication stocks lagged.
- Progress toward the ‘Phase 1’ trade deal kept up its momentum. The market sense is posive in the short term (no noise) but a bit more skeptical over the longer term given several highly sensitive and material issues remain to be addressed in future negotiations.
- A Brexit extension to January 31st has been requested by PM Johnson and granted by the EU. Johnson is seeking a December 12th snap election in an attempt to regain a Conservative majority. No deal risk has fallen sharply, GBP has rallied in response, and election risk is the new focus.
- 40% of S&P 500 companies earnings reports are in. FactSet is reporng an 80% beat rate and a 3.7% blended bottom line. Revenue is beating at a 64% clip with a blended top line of 2.8%.
- The FOMC is expected to cut rates 25bps this week, U.S. M2 growth is +8% annualized over the past 13 weeks and the yield curve has un‐inverted. The liquidity backdrop looks supportive.
- With POTUS impeachment headlines becoming more pronounced, it is clear the market is not pricing in any material change to the status quo.
- Global equity markets are parcipang this year with 12 of 29 major global equity markets within 1% of their 52‐week highs. China stands out as the sole outlier.
- The UAW and GM came to an agreement last week aer a 40‐day strike, one of the longest private sector strikes we’ve seen in years.
- The third largest economy in Lan American seems to have turned back to the Peronist party with Alberto Fernandez over the weekend. Sovereign debt haircuts, massive deficits, and hyperinflation apparently more palatable than Macri’s efforts to right the ship.
Economic Release Highlights
- September durable goods orders fell 1% (‐0.7% expected). The report served to embolden the doves as both ex‐transportation and capital goods components fell more than expected.
- Exisng home sales fell 2.2% against a strong backdrop August number. The smoother 3‐month average moved higher (0.6%) for a fourth straight month, now at levels not seen since May 2018.
- September new home sales came in at a healthy 701,000 annual rate, up 15.5%YoY, an encouraging result. The three‐month average (691,000) is running at the highest levels since the GFC. Pricing data was ‐7.9% in September (‐8.8% YoY).
- October’s University of Michigan consumer senment reading came in near consensus at 95.5, down slightly from the first half of October but still up nicely from September’s 93.2 reading.
- U.S. ﬂash PMI registered 51.2, 51.5, 51.0 (C, M, S) for October, showing signs of stability and even some improvement from September readings.
- Eurozone ﬂash PMI registered 50.2, 45.7, 51.8 (C, M, S) for October. Held down by some of the worst manufacturing readings since 2012.
- Weekly jobless claims (212,000) have spent 241 weeks (March 2015) at or below 300k and 106 weeks (October 2017) at or below 250k, both all‐time record streaks.