Telemus Weekly Market Review November 26th - November 30th, 2018

November 26 – November 30 Week in Review

The markets were back in rally mode last week, helped by the Fed softening its policy stance and by hope that U.S-China trade tensions would be meaningfully eased at the G-20 Leaders Summit in Argentina. The tech heavy Nasdaq led the way, gaining 5.6%, the Dow was next, up 5.2%, the S&P500 gained 4.9% and the Russell 2000 rose 3.0% for the week. 

The stock market had one of its best days of the year on Wednesday when Federal Reserve Chair Jerome Powell said he sees current interest rates "just below" neutral. That proved to be a rallying cry for the markets because the language Mr. Powell used in early October indicated a view that the fed funds rate was "a long way from neutral." Mr. Powell added that there is no preset policy path, and the Fed will be data-dependent in its decision making, which also pleased investors.

Regarding U.S.-China trade talks U.S. Trade Representative Lighthizer said that he would be surprised if the dinner meeting that President Trump and President Xi are scheduled to have at the G-20 Summit was not a success. This only added fuel to the market’s fire. Perhaps causing some jitters though, was the fact that notable China trade hawk Peter Navarro is now reportedly expected to attend the dinner meeting, along with other staff on hand.

In addition to the trade speculation and dovish rhetoric from the Fed, there was a positive bias in the market last week due to the belief that the prior week's sell-off resulted in short-term oversold conditions. Efforts to pick up oversold issues, and some chasing behavior, helped fuel the week's gains, which ultimately turned November from a negative month into a positive month for the major indices.

All S&P sectors finished higher last week with the consumer discretionary, information technology, health care, and communication services sectors leading the way. The defensive-oriented real estate, consumer staples, and utility sectors underperformed the broader market, though still finished with respectable gains.

Overseas equity indices also showed gains last week. The Asia-Pacific region closed on a modestly positive note with Japan's Nikkei showing relative strength. In Europe, the major indices closed slightly higher with Italy's MIB showing relative strength.

In corporate news last week, General Motors announced additional restructuring plans that will result in a 15% reduction of its salaried staff and the closure of five of its North American plants. This prompted President Trump to tweet his disappointment in GM and say he is looking to cut all of its government subsidies. United Technologies announced its intention to split into three independent companies after the Dow component acquired Rockwell Collins earlier this month.

A host of earnings were announced last week with Salesforce, Burlington Stores, Dollar Tree, VMware, HP, and Workday releasing upbeat reports, while Tiffany & Co, GameStop, and J.M. Smucker announced disappointing results.

On the interest rate front the Treasury yield curve saw some flattening last week with the 2 year yield losing one basis point to 2.81%, and the 10 year yield losing four basis points to 3.01%.

Crude oil was basically unchanged last week with WTI crude adding 0.1% to $50.67 a barrel. For the month crude lost over 20%.

December 3 – December 7 Economic Calendar