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Market Commentary for the week ending December 21st, 2019
- World stock markets rallied for another week with U.S. stocks closing at record highs
- The Impeachment of President Trump has no impact on the markets
- Economic data remains generally positive with positive reports on Housing Starts and Industrial Production
Market Performance Summary
Notable Market Headlines
Markets around the world rallied once again with U.S. stocks closing at record highs with investors showing signs of a renewed and continued appetite for risk with riskier small stocks and emerging markets performing the best. The news on trade continues to be viewed positively while the House of Representatives vote to impact President Trump are clearly of little or no concern for investors today.
At the close of the week, large U.S. stocks were higher by +1.1% as measured by both the S&P 500 and Dow Jones Industrials while the tech-heavy NASDAQ surged by +2.2%. The Healthcare and Telcom sectors were the best performing while Financials lagged behind. Small U.S. stocks outgained large up +2.2% for the week. Year-to-date though large stocks continue to maintain their lead up +30.1% for large stocks and +25.6% for small stocks.
International markets were higher along with U.S. markets with developed markets, on average, gaining +0.4%. Among the best performing markets was Italy up +2.4% while the United Kingdom’s market was flat following a rally the week before on elections news. Emerging markets’ performance demonstrated investors’ desire for more risk with markets jumping +2.6% for the week fueled in large part by a rally in China’s market by +3.0%.
All of the alternative asset classes were higher with commodities doing the best, up +1.6% for the week, helped by a rise in the price of oil. Real estate stocks were a very close second gaining +1.5% after suffering a sharp loss the week before. Gold was higher but lagged behind with a gain of just +0.3%.
Bonds slipped in value down -0.3% while U.S. government bonds down even more at -0.6%. Again, the movement illustrates investors leaving these less risky investments, as some uncertainty in the global economy clears, for more risky holdings.
Conagra Brands (CAG), a $10 billion in revenue U.S. based food company with brands including Chef Boyardee, Wesson oil, and Pinnacle Foods, reported quarterly earnings that came in better than Wall Street analysts were expecting but missed the revenue target. Although earnings per share topped estimates they were below last year’s number. Investors welcomed the news from Conagra’s with its stock being the best performing among the S&P 500 for the week, up +23.6%, and higher by +64.2% year-to-date although it remains below its 2017 all-time high.
Netflix (NFLX), the streaming media giant, saw its stock move higher all 5 days of the week cumulatively gaining +12.9% for the week. One analyst raised his expectations for the stock citing the company’s international growth opportunity. Netflix is facing increased streaming competition that has worried investors but this analyst sees the competition helping the entire streaming business and expects Netflix to add 8 million new international subscribers in the fourth quarter alone. Netflix’s stock has been one of the hottest during the decade but remains well below its 2018 high.
FedEx (FDX), the global shipping giant, has faced a variety of business pressures in the last year including the global economic slowdown combined with the loss of all Amazon (AMZN) related business. The company reported quarterly results that were below expectations sending its stock lower. As illustrated in the accompanying graph, revenue stalled earlier in 2019 and continued to do so in the most recent quarter. The stock closed the week down -10.6% and is well off its 2018 high.
Economic Indicator - Reported
Housing Starts increased again climbing +3.2% in the most recent month helped by persistently lower interest rates. Both single family and multi-family starts were higher driving a year-over-year increase in total starts by a strong +13.6%
Existing home sales moved in the opposite direction of starts slowing by -1.7% in the most recent month to 5.35 million annualized. Prices have risen for 93 consecutive months and inventory fell to just 3.7 months which have both contributed to slowing sales.
Industrial Production, one indicator of the manufacturing sector, showed its strongest gain in 2 years increasing by +1.1% in the most recent month. Although the month was strong, year-over-year production is down by -0.8%.
Economic Indicators – Upcoming
The following economic data are expected in the coming week:
- New Home Sales
- Durable Goods Orders
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