The S&P 500 reached new highs, with U.S. stocks now up six weeks in a row. In the fourth quarter, we have only had to endure one week of negative returns for stocks. Outside of the drama in Washington, which investors appeared content to ignore (or at least patiently absorb), meaningful market news was minimal. Even Fed Chair Powell’s testimony provided only a handful of soundbites. On balance, they were positive and provided investors reason to believe that the economic expansion can continue.
Headlines This Week
China is asking the Trump administration to remove previously imposed tariffs before committing to the “phase one” trade deal. While the President has stated he is not planning to roll back tariffs, his economic adviser Larry Kudlow told reporters that “we are coming down to the short strokes” and are “in communication with them every single day.”
- The administration is also continually floating a “middle-class tax cut,” but details are lacking.
The hot seat
Federal Reserve Chairman Jerome Powell comforted investors while testifying on Capitol Hill. Here are the highlights:
- There are no signs of asset bubbles brewing in the markets.
- There are no immediate risks from higher national debt and deficits.
- Economic expansion may last much longer than any other in the U.S. recorded history as a result of stubbornly low inflation.
U.S. Treasury yields finished lower this week, helping fixed income portfolios end in the green.
- The U.S. Central Bank added more liquidity to the overnight lending markets and 13-day repo operations to stabilize the federal-funds rate within the target range of 1.50%-1.75%.
- While the temporary boost in liquidity is not classified as a stimulus, it is creating liquidity that is helping financial markets.
The Week Ahead
A relatively quiet week again as just three companies in our strategies report earnings: Medtronic Plc (MDT), The TJX Cos. (TJX), and Williams-Sonoma (WSM).
- TJX is expected to post encouraging numbers as consumers continue to flock to the discount offerings of TJ Maxx, Marshalls, and Home Goods.
- Williams-Sonoma is expected to show an increase in earnings on the back of strong consumer spending.
A significant story out of the U.S. next week will be the release of the Federal Open Market Committee minutes.
- Investors will be looking to the minutes to gauge support amongst the Committee regarding future rate policy.
- The U.S. will also release its preliminary PMI figures for November on Friday.
Across the Pond, ECB President Christine Lagarde will hold a speech on Friday in Germany.
- Lagarde began her tenure as ECB President this month.
- Following the speech, the EU is expected to release its preliminary Manufacturing and Services PMI figures for November.
- The ECB will also be releasing its Meeting Minutes on Thursday that could help shed light on the direction they intend to take regarding policy.
Stock Highlights from Max
Now that’s a Plus
The Financial sector was the laggard this week, dragged down by banks who gave back some ground. After all, regional banks were up around 10% over the past month. The leading sector this week was Communication Services thanks to…
- The Walt Disney Co. (DIS) continued its winning ways when it announced that subscriptions to its streaming app Disney+ reached 10 Million subscribers after one day of existence. Non-believers quickly pointed out that the one-week free trial and the subscribers from Verizon’s one-year free Disney+ offer are inflating the figures. They believe a large number of these subscribers will not renew after the free period ends. This successful launch is only the beginning of a colossal year-end for the company. Frozen II, which we wrongfully reported to be out in December last week, is set for release on November 22nd. I had to correct the oversight because I just could not “let it go.” Star Wars: The Rise of Skywalker premiers on December 20th, right in time for Christmas, but the full impact of the movie will not hit earnings until the first quarter of 2020 due to the late release. Speaking of earnings…
- Walmart Inc. (WMT) beat expectations when it reported earnings. The retailing goliath increased comparable sales by 3.2% in the quarter. Transactions were 1.3% higher, and the average transaction size was 1.9% higher. Total sales of $128 Billion in the quarter were 2.5% higher than the same period last year. Even international sales grew by 1.3%. The most impressive number from the report would have to be the 41% increase in eCommerce sales. The slight boost in guidance was also a plus. Another earnings report of note came from…
- Cisco Systems, Inc. (CSCO) reported okay numbers but scared investors with their guidance. Cisco is claiming that there is a slow-down in technology infrastructure spending by companies. While the consumer remains robust, as demonstrated by Walmart, businesses are cautious, thanks to the ever-present fear o.. well, everything. The softness in corporate spending may be reversed quickly if a deal with China is agreed upon.
Frozen II premiers on November 22nd, providing an excellent opportunity for those of us with kids to get out and #LIVE.
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