Monday Market Review December 30, 2019
On a shortened holiday week, economic data was limited to weaker-than expected durable goods orders, mixed new home sales results and lower jobless claims.
Global equity markets gained, with continued seasonal optimism, led by the risk-oriented segments, including consumer and emerging markets. Bonds rose slightly due to lower interest rates. Commodities rose in most all segments with help from a weaker dollar.
U.S. stocks continued to rise, in a continuation of the ‘Santa Claus rally’ known to happen during year-ends historically. Last week was aided by stronger sentiment from continued positive rhetoric over the U.S.-China phase one becoming closer to a done deal, as well as Congressional approval of the U.S.-Mexico-Canada trade agreement. The Nasdaq Composite reached the psychologically important milestone of 9000 for the first time. By sector, consumer discretionary and technology led the way with gains over a percent each, led by strength in the shares of Amazon to a large degree due to holiday sales, while defensive utilities lagged with minor losses.
Foreign stocks fared better than domestic equities, with strength in U.K. and the Eurozone offsetting weaker results in Japan. Believe it or not, the European STOXX Europe 600 Index reached a record high last week, despite being overshadowed by strength in U.S. markets. Emerging markets also performed positively, led by commodity-focused Brazil and Russia, among other nations expected to experience revenue improvement under a more stable world trade regime.
U.S. bonds gained slightly, along with bond yields ticking downward across the yield curve. Investment-grade corporates outperformed both high yield and government bonds for the week. A weaker dollar benefitted foreign bonds, which saw gains in both developed and emerging market segments.
Commodities gained across the board, with help from the weaker dollar, and led by precious metals, energy and agriculture. The price of crude oil rose over 2% to just under $62/barrel, which more than offset the -3% decline in the price of natural gas.
(-) Durable goods orders in November fell by -2.0%, which disappointed compared to the median forecast expectation of a 1.5% gain. Removing transportation from the group resulted in a flat month, due to the weakness in defense aircraft orders dominating the month, while the core capital goods orders measurement showed a 0.1% gain. Core capital goods shipments fell -0.3%, which below expectations calling for no change, and continues a negative trend over past five months. Over the last twelve months, orders have fallen by -4% including transportation orders, while orders excluding transportation are a few tenths lower than last year.
(-/0) New home sales for November rose by 1.3% to a seasonally-adjusted annualized rate of 719k, but lagged consensus forecasts calling for 732k. Additionally, sales for several prior months was revised downward by a total of -31k. Regionally, the West and Northeast saw gains of over 10k, while sales in the South declined by -17k. Relative to a year ago, sales are up 17%, which is a healthy figure. The months supply of new homes fell a tenth to 5.4 months, while the median new home price is up 7% from last year at $330,800.
(0/+) Initial jobless claims for the Dec. 21 ending week fell by -13k to 222k, just above the 220k level expected. Continuing claims for the Dec. 14 week fell by -6k to 1.719 mil., which came in above the 1.688 mil. level expected. Winter seasonal adjustments continue to be a factor most likely, while overall levels remain extremely low, and indicative of a strong labor market.
Have a good week.
Ryan M. Long, CFA
Director of Investments
FocusPoint Solutions, Inc.
Sources: FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, First Trust, Goldman Sachs, Invesco, JPMorgan Asset Management, Marketfield Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, PIMCO, Standard & Poor’s, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.