Last Week:

  • U.S. equities finished negative for the week: Stocks quickly reversed the previous week’s gains as U.S./China trade uncertainty (lack of a substantive agreement and the Huawei CFO arrest) and the flattening yield curve once again rose to the top of investor concerns. On the week, the Dow Jones Industrial Average (Dow) lost 1,150 points, or fell 4.50%, to 24,389. The Standard & Poor’s (S&P500) index decreased 127 points, or fell 4.60% to 2,633. The Nasdaq closed 4.93% lower at 6,969, while the 10-year Treasury ended the week at 2.85%.
  • November Jobs Report: Last week, the Bureau of Labor Statistics reported that the U.S. economy added 155,000 jobs in November—well below expectations of 190,000 jobs. The unemployment rate remained unchanged at 3.7% (~50-year low), with broad-based job gains led by healthcare, manufacturing, and transportation, highlighting the continued strength of the U.S. labor market. Average hourly earnings grew +0.2%, on top of last month’s +0.2% growth, with the last 12-months’ growth rate remaining at +3.1%. Overall, although the job additions number shows a slowdown from the previous month, considering the U.S. labor market is near full employment and inflation is around the Fed’s 2% target, the 155,000 new jobs number continues to represent solid job growth. Over the last several weeks, we have seen the Fed stress a more data-dependent approach, and economists believe the jobs report remains good enough to keep the Fed on track for a December rate hike (~72% odds). With that said, investors expect the Fed to be more cautious in 2019, with expectations for a further hike in all of 2019 below 50%.
Source: Bureau of Labor Statistics, Strategas Research Partners

Look Ahead:

  • Third quarter earnings season will continue to wrap up this week. Some notable reporters include DSW, Progressive, Adobe, and Costco, among others. There will also be a number of sell-side conferences and investor days during the week.
  • On the economic calendar, we will see the October Job Openings and Labor Turnover Report (JOLTS) on Monday, November Producer Price Index and Small Business Optimism Index on Tuesday, European Central Bank monetary policy decision and November Import/Export Price Indexes on Thursday, and Retail Sales data from the Census Bureau on Friday.