Weekly Expert Market Perspectives Park Avenue Securities PAS

S&P 500 Closes Above 3000, Led Higher By Value Stocks

The stock market extended its winning streak to three weeks, with value-oriented sectors leading the market closer to all-time highs. The S&P 500 (+1.0%) climbed back above the 3000 level while the Dow Jones Industrial Average (+1.6%) rose back above 27000. 

The Nasdaq Composite (+0.9%) did well, too. The small-cap Russell 2000 rose 4.9%, and the S&P MidCap 400 rose 2.7%.

Improved outlooks for trade and growth helped generate renewed buying interest in value stocks, or those with less demanding valuations. Like small-caps and mid-caps, the S&P 500 financials (+3.9%) and energy (+3.4%) sectors, SPDR S&P Retail ETF (XRT +6.2%), and Dow Jones Transportation Average (+5.0%) posted sizable gains.

Crowded trades like U.S. Treasuries, highly-valued growth stocks, and defensive-oriented stocks fell out of favor. The S&P 500 information technology (-0.4%), consumer staples (-0.9%), and real estate (-2.2%) sectors finished in negative territory.

The sell-off in the Treasury market drove the 2-yr yield up 27 basis points to 1.79% and the 10-yr yield up 35 basis points to 1.90%. A stronger-than-expected 0.3% increase in core CPI for August further pressured Treasury yields. The U.S. Dollar Index declined 0.2% to 98.20.

Contributing to the improved outlook for trade included a series of positive-sounding trade developments. President Trump said he will delay the tariff rate increase on $250 billion of Chinese imports to Oct. 15 from Oct. 1 at China's request. China exempted certain U.S. products from a higher tariff rate, including pork and soybeans. President Trump said he would at least consider an interim trade deal.

The trade-sensitive Philadelphia Semiconductor Index advanced 2.4%.

From a growth perspective, economic data continued to suggest the U.S. consumer could continue to support growth and ward off a recession. For instance, weekly initial jobless claims remained at historically low levels, retail sales increased 0.4% in August (Briefing.com com consensus 0.3%), and consumer sentiment rebounded in September.

Accommodative measures announced by the ECB were other supportive factors for equities. The central bank cut its deposit rate to -0.5% from -0.4% and said it will restart buying back bonds at a monthly pace of €20 billion euros, a process known as quantitative easing, starting Nov. 1.

Separately, WTI crude ($54.88/bbl) fell 2.8% this week, burdened by a series of bearish news. President Trump was reportedly in talks to ease sanctions on Iran. OPEC downgraded its forecasts for oil demand in 2019 and 2020. The ECB lowered its eurozone growth forecasts for 2019 and 2020.

To download the printable version, CLICK HERE.

Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Briefing.com. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is an indirect, wholly-owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

2019-86177 (Exp 12/19)