Telemus Weekly Market Review October 29th - November 2nd, 2018

October 29 – November 2 Week in Review

The markets staged a comeback last week, with all the major indexes posting strong gains. Underpinning the rally was the expectation that the market was due for a rebound after October’s selloff, mostly upbeat earnings reports, and possible easing trade tensions with China. The S&P500 rose 2.42%, the blue chip Dow Jones Industrial Average gained 2.36%, the tech heavy Nasdaq gained 2.65%, and the small cap Russell 2000 index gained 4.32%.

Cyclical stocks were among the best-performing groups, with the materials sector and financials sector leading the advance. The consumer discretionary sector also had a notable gain. On the downside, utilities were the only group to settle in the red last week.

U.S.-China trade tensions eased last week, with U.S. President Trump saying that he had a "long and very good conversation" with China's President Xi, adding that the two leaders will be getting together at the upcoming G-20 summit in Argentina. There were some conflicting reports as to whether Mr. Trump has asked his cabinet to begin drafting a trade deal, but the president did say he thinks a deal will eventually be reached.

On the earnings front last week, Facebook's third quarter report was relatively well received, helping to ease investors concerns over its growth prospects. Apple, on the other hand, raised some red flags after forecasting softer than expected revenue guidance for the upcoming holiday quarter and announcing that it will no longer provide unit sales data for the iPhone, iPad, and Mac.

Other notable companies to report earnings last week included Pfizer, Coca-Cola, Chevron, Exxon Mobil, General Motors, eBay, DowDuPont, and Starbucks, all of which beat estimates. Conversely, results from General Electric, Spotify and Kellogg came in below consensus.

Highlighting last week's batch of economic data was the Employment Situation report for October. Nonfarm payrolls increased by 250,000, higher than the consensus of 190,000, while average hourly earnings increased 0.2% as expected. The unemployment rate remained at a nearly 50-year low of 3.7%. The key takeaway from the report is that it is consistent with labor market trends that will keep the Federal Reserve on a tightening path. The U.S. Federal Reserve will be meeting next week, but no hike in interest rates is expected until December.

Overseas, European and Asian stocks rose with Wall Street last week. In Germany, Chancellor Angela Merkel announced that she won't be seeking re-election as head of the CDU, following disappointing results for her party in a regional election. Her plan, however, is to remain Chancellor until 2021. Meanwhile, the Bank of England and the Bank of Japan released their latest policy decisions, keeping interest rates unchanged.

Interest rates in the U.S. jumped last week as strong economic and employment data pushed yields higher. The benchmark 10 year U.S. Treasury note closed at 3.214 on Friday, its highest level since early October.

Crude oil prices fell sharply last week, down over 7%, closing Friday at $62.86 a barrel despite looming Iran sanctions.  

November 5 – November 9 Economic Calendar