Last Week:

  • U.S. equities finished positive for the week: With the uncertainty of the midterm elections now behind us, equity markets rallied, up 2% during the week. The Dow Jones Industrial Average (Dow) gained 718 points, or rose 2.84%, to 25,989. The Standard & Poor’s (S&P500) index increased 58 points, to 2,781. The Nasdaq closed 0.68% higher at 7,407, while the 10-year Treasury ended the week at 3.19%.
  • Economic Data Recap: Last week, the statement from the November Federal Open Market Committee (FOMC) meeting brought no surprises. Fed officials remained hawkish on average, citing the continued strength of the U.S. economy and the labor market in general. Consensus expectations of a Fed rate hike at the December meeting remained unchanged. During the week, we saw the non-manufacturing ISM data, which showed that the U.S. services sector continued to grow strongly, although it was a slight moderation from the record September numbers. We also saw the October Producer Price Index firm above expectations—the main driver being the +2.7% m/m rise in energy following a rise in gasoline and natural gas prices last month. Nonetheless, as oil prices have entered bear market territory in the last few weeks, the move will probably reverse.
  • Finally, towards the end of the week, we saw the University of Michigan Consumer Sentiment Index for November at 98.3, above expectations, but in line with the October reading. The survey administrators noted that, although the index has remained high and very stable over the last several months, there is a renewed strength in nominal income expectations, a critical indicator of overall spending. According to the survey, “among the working age population (ages 25-54), the anticipated annual gain in nominal household income was +3.6% in November, the best in the past decade.”
Source: University of Michigan Consumer Sentiment Survey (2018)

Look Ahead:

  • Third quarter earnings season will begin to wrap up this week. Some notable reporters include Advance Auto Parts, Home Depot, Cisco, Macy’s, Nordstrom, Viacom, J. C. Penney’s, and Walmart, among others. Brokerage conference will return to the schedule with UBS, Cowen, Citi, Credit Suisse, Barclays, and Morgan Stanley all holding conferences, as well as a notable uptick in Investor meetings.
  • On the economic calendar, we will see National Federation of Independent Business (NFIB) Small Business Optimism index on Tuesday, Consumer Price Index (CPI) on Wednesday, both Retail Sales and Empire Manufacturing data on Thursday, and Industrial Production on Friday. Outside the U.S., we will see Euro zone and German ZEW numbers, as well as China and Japan Industrial Production numbers, and Japan Q3 preliminary Gross Domestic Product (GDP) numbers.