The Past Week in the Markets

08 Feb

U.S. Stocks ended up slightly for the week extending gains for a seventh week.  Fears of not reaching a trade agreement with China and slowing global growth weighed on the markets on Thursday and Friday.  Foreign stocks indices were lower for the week.  President Trump said there is no plan for a meeting with Chinese President XI before the March 1st deadline and Larry Kudlow said there is a pretty sizeable difference to be bridged before a trade deal can be reached.  U.S./China trade talks resume in Washington next week.  Progress was made on a bipartisan border security agreement which will hopefully avoid another shutdown.  The Bank of England left interest rates unchanged but little progress has been made on avoiding a hard Brexit bat the end of March. While Q4 earnings are good, many companies are lowering their 2019 forecasts as the one time benefit form the tax cut is in the rear view mirror.

The dollar strengthened this week against a basket of currencies while gold prices declined.  The 10-year Treasury yield declined to 2.63%

In the numbers this week:

  • The Treasury Department released data showing share of foreign ownership of U.S. government debt has fallen from 55% in 2008 to less than 40% in November 2018.  China’s ownership of U.S. government debt has fallen from 14% to a little more than 7%.
  • The Institute for Supply Management reported:
    • Its manufacturing purchasing managers index increased from 54.3 in December to 56.6 in January, showing accelerating growth in January.
    • Its non-manufacturing PMI fell from 58 in December to 56.7 in January.  This still represents expansion, but at a slower acceleration.
  • The Commerce Department reported that the U.S. Trade deficit fell 11.5% in November.  Both imports and exports fell but the fall in imports was much larger.  The biggest drop was in cellphones and other household good.
  • Germany’s statistics agency reported that factory orders fell 1.6% in December and were down 7% form a year earlier, mainly due to a drop in export orders.
  • The Labor Department reported:
    • First time claims for unemployment fell 19,000 to a seasonally adjusted 234,000.  The four week moving average of claims rose 4,500 to 224,750.
    • Productivity of U.S. manufacturing workers rose at a seasonally adjusted 1.3% rate in the fourth quarter.  The broader productivity of all non-farm workers was not reported due to the government shutdown.
  • The Energy Information Administration weekly report is here wpsrsummary.  Also, the EIA reported
    • U.S. Crude oil production remained at 11.9MM barrels per day.
    • Storage of natural gas fell 237BN cubic feet.
    • Baker Hughes reported in the past week that the number of active oil rigs rose 7 to 854 and the number of active gas rigs fell 3 to 195.
  • Factset reported with 66% of S&P 500 companies reporting earnings, the blended earnings growth rate in the 4th quarter was 13.3%.  71% of companies reporting had positive earnings surprises and 62% had positive revenue surprises.  12 companies have issued positive earnings guidance and 53 had issued negative earnings guidance for Q1.

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Best Regards,

Loren C. Rex, CFP®, AIF®, MA                                                         Erik A Smith

President                                                                                                 Managing Partner

Generations Financial Planning & Wealth Management             269-441-4143

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Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.