Decmber 6, 2019

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

The stock market remained driven by shifting trade policy perceptions (doubtful, then hopeful), but a strong employment report capped a week of mixed economic data.

Nonfarm payrolls rose by 266,000 in the initial report for November, boosted partly by the return of striking GM workers. Figures for September and October were revised higher, suggesting a relatively strong near-term trend in job growth (in contrast, the ADP estimate of private-sector payrolls rose by 67,000). At 3.5% (a 50-year low), the unemployment rate was essentially unchanged. Average hourly earnings rose moderately (+3.1% y/y), but accelerated for production workers (+3.7% y/y).

The ISM Manufacturing Index remained in contraction for the fourth consecutive month, with continued declines in production, new orders and employment. The ISM Non-Manufacturing Index fell a little short of expectations, but details remained consistent with moderate growth in the overall economy. Unit auto sales rebounded in November. UM consumer sentiment improved, with virtually no impact from the impeachment inquiry.

Next week, the Federal Open Market Committee is widely expected to leave short-term interest rates unchanged. Senior Fed officials will revise their outlooks for growth, unemployment and inflation. The refreshed dot plot and Powell’s press conference should be consistent with monetary policy on hold for the foreseeable future. Retail sales results for November should show a good start to the holiday shopping season (especially in comparison to the weak results of a year ago).


Indices

  Last Last Week YTD return %
DJIA 27677.79 28164.00 18.65%
NASDAQ 8570.70 8705.18 29.17%
S&P 500 3117.43 3153.63 24.36%
MSCI EAFE 1969.77 1982.23 14.53%
Russell 2000 1614.83 1634.10 19.75%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.75 5.25
Fed Funds 1.54 2.20
30-year mortgage 3.79 4.73

Currencies

  Last 1 year ago
Dollars per British Pound 1.316 1.278
Dollars per Euro 1.110 1.137
Japanese Yen per Dollar 108.76 112.68
Canadian Dollars per Dollar 1.317 1.338
Mexican Peso per Dollar 19.362 20.352

Commodities

  Last 1 year ago
Crude Oil 58.43 51.49
Gold 1483.10 1243.60

Bond Rates

  Last 1 month ago
2-year treasury 1.58 1.67
10-year treasury 1.79 1.94
10-year municipal (TEY) 2.29 2.47

Treasury Yield Curve – 12/06/2019

Chart

As of close of business 12/05/2019


S&P Sector Performance (YTD) – 12/06/2019


Chart

As of close of business 12/05/2019


Economic Calendar

December 11  —  Consumer Price Index (November)
 —  FOMC Policy Decision
 —  Fed Summary of Economic Projections
 —  Powell Press Conference
December 12  —  Jobless Claims (week ending December 6)
 —  Producer Price Index (November)
December 13  —  Import Prices (November)
 —  Retail Sales (November)
December 17  —  Building Permits, Housing Starts (November)
 —  Industrial Production (November)
December 25  —  Christmas Holiday (markets closed)
January 1  —  New Year’s Day (markets closed)
January 10  —  Employment Report (December)
January 29  —  FOMC Policy Decision
January 30  —  Real GDP (4Q19, advance estimate)

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business December 5, 2019.