Weekly Expert Market Perspectives Park Avenue Securities PAS

Stock Market Ends Week Lower, Undercut By Headlines

The major U.S. indices lost ground this week, as the market appeared rattled by negative-sounding headlines related to trade and politics. The Dow Jones Industrial Average declined just 0.4%, but the S&P 500 (-1.0%), Nasdaq Composite (-2.2%), and Russell 2000 (-2.5%) posted sizable losses. 

The market had two noticeable declines this week, with the first one coming on Tuesday as the market paid heed to the launch of an impeachment inquiry on President Trump. It seems unlikely at this point that anything material will transpire, but the political wrangling and uncertainty in how much this will affect trade negotiations weighed on sentiment.

Through all the ensuing political headlines, the market was still trending toward a relatively flat week on Friday. That was the case until headlines out of Bloomberg indicated that the White House was considering limiting U.S. investors' portfolio flows into China and delisting Chinese companies from U.S. stock exchanges. Granted, these were just headlines, but they clouded the outlook for a trade deal and threatened to upend the good will established by both countries ahead of trade talks on Oct. 10-11. 

The S&P 500 health care (-3.0%), energy (-2.6%), and communication services (-2.3%) sectors led the broader retreat. Many energy stocks were pressured by the continued decline in oil prices ($55.90/bbl, -$2.19, -3.8%) as supply concerns dissipated. The communication services sector was weighed down by shares of Facebook (FB), which lost nearly 7% amid recurring antitrust concerns. 

Micron (MU) shares sold off 11% on Friday, pressured not only by the negative-minded trade speculation but also by soft guidance and a record inventory level. The Philadelphia Semiconductor Index lost 1.3% this week.

The defensive-oriented consumer staples (+1.2%), utilities (+1.3%), and real estate (+0.2%) sectors were the lone sectors that finished higher. Demand for U.S. Treasuries wasn't too noticeable, as yields only declined modestly this week. The 2-yr yield declined three basis points to 1.65%, and the 10-yr yield declined three basis points to 1.69%. The U.S. Dollar Index advanced 0.6% to 99.10.

This might have been due to an understanding that the U.S. economy remains in decent shape. For instance, weekly jobless claims remained at historically low levels (213,000); the annual pace of new home sales for August (713,000) was one of the highest readings since October 2007; pending home sales rebounded 1.6% in August (Briefing.com consensus 0.6%); preliminary data showed encouraging manufacturing activity in the U.S. for September; and inflation pressure remained muted.

Still, it wasn't a good week for the broader market, and it was arguably a terrible week for IPOs. Peloton (PTN) fell 11% in its first day of trading, which reportedly caused Endeavor Group to scrap its IPO one day before going public. The We Company (WE) postponed its IPO while Adam Neumann was pressured to step down as CEO.

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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.

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2019-87016 (Exp 12/19)

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