Last Week:

  • U.S. equities finished positive for the week: Stocks rebounded strongly last week, marking the largest weekly gain this year, buoyed by strong Black Friday and Cyber Monday sales and comments from the Fed Chair Jerome Powell around interest rates being close to neutral – in contrast to his prior statement in October. On the week, the Dow Jones Industrial Average (Dow) gained 1,253 points, or rose 5.16%, to 25,538. The Standard & Poor’s (S&P500) index increased 128 points, to 2,760. The Nasdaq closed 5.64% higher at 7,331 while the 10-year Treasury ended the week at 3.01%.
  • Trump/Xi: At the Group of 20 (G-20) summit this weekend in Buenos Aires, the U.S. and China agreed to a 90-day cease-fire as the two countries renegotiate and come to an agreement. Although the details around the agreement are still vague, the U.S. agreed to postpone its threat to increase tariffs on $200 billion in Chinese goods to 25% from the current 10%, previously scheduled to go into effect in January. In addition, in a tweet on Sunday, President Trump shared that “China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.” The outcome from this weekend is positive for financial markets, and investors will be looking for more detail in the coming weeks.
  • Economic Data Recap: The Conference Board’s measure of U.S. Consumer Confidence dipped slightly in November, although overall the numbers remain elevated. According to the Conference Board, “Consumers’ assessment of current conditions increased slightly, with job growth the main driver of improvement. Expectations, on the other hand, weakened somewhat in November, primarily due to a less optimistic view of future business conditions and personal income prospects. Overall, consumers are still quite confident that economic growth will continue at a solid pace into early 2019. However, if expectations soften further in the coming months, the pace of growth is likely to begin moderating.”
  • Fed: Following Jerome Powell’s comments last week that “interest rates are just below what would be considered a neutral level” and the “dovish” FOMC meeting minutes, expectations for a Fed rate hike in December are now 80%, with the rate path in 2019 more uncertain – with one hike in 2019 currently just barely above 50% in June. With that said, the official FOMC outlook still calls for three rate hikes next year.

Look Ahead:

  • Third quarter earnings season will continue to wrap up this week. Some notable reporters include Dollar General, Toll Brothers, Brown-Forman, Lululemon Athletica, and Kroger, 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 Purchasing Manager’s Index (PMIs) on Monday, ADP’s November National Employment Report and The Institute for Supply Management’s Non-Manufacturing Index on Wednesday, Import / Export prices and Trade balances on Thursday, and finally the November  Jobs report and Michigan consumer sentiment on Friday. Outside the U.S., there is a Euro-zone meeting on Monday and European Central Bank policy meeting on Wednesday.