Weekly Expert Market Perspectives Park Avenue Securities PAS

Strong Jobs Report Helps S&P 500 Erase Weekly Losses

The S&P 500 increased 0.2% in a choppy week of trading, as a strong November employment helped the broader market overcome a rough start. The Russell 2000 rose 0.6%, while the Dow Jones Industrial Average (-0.1%) and Nasdaq Composite (-0.1%) were unable to recoup all their losses. 

This week's leaders included the S&P 500 energy (+1.5%), consumer staples (+0.9%), health care (+0.9%), and financials (+0.7%) sectors. The industrials (-1.1%), consumer discretionary (-0.8%), information technology (-0.4%), and real estate (-0.3%) sectors finished lower. 

The week began with the S&P 500 dropping about 70 points, or 2.3%, from its Friday closing level in less than two sessions. The two primary catalysts were a weaker-than-expected ISM Manufacturing Index for November and President Trump suggesting that a trade deal with China might be better if it waited until after the 2020 election. 

The news might have been good excuses to take some profits after a great month of November (and year), but an opportunistic mindset quickly took fold. Risk sentiment was first supported by reports that trade talks are nearing a deal and was later buoyed by a stronger-than-expected November employment report. 

Nonfarm payrolls climbed 266,000 (Briefing.com consensus 182,000), firmly beating expectations and coming in above the upwardly revised readings for October and September. The unemployment rate ticked down to 3.5% (Briefing.com consensus 3.6%), and average hourly earnings increased 0.2% (Briefing.com consensus 0.3%). 

On Friday, China added to the upbeat trade mood after it said it began to exempt some U.S. agricultural purchases from tariffs. On a related note, tariffs on steel and aluminum imports from Argentina and Brazil were restored after the countries devalued their currencies, while $2.4 billion of French imports may be taxed up to 100% after France passed a digital tax law that allegedly targets U.S. tech companies.

Separately, there were some notable corporate leadership changes.

Alphabet's (GOOG) CEO Larry Page and President Sergey Brin stepped down from management and ceded CEO duties to Sundar Pichai in addition to his current CEO role at Google. Expedia's (EXPE) CEO Mark Okerstrom and CFO Alan Pickerill resigned at the board's request. United Airlines (UAL) CEO Oscar Munoz will step down in May and transition to Executive Chairman.

U.S. Treasuries had some big swings but ultimately finished near their unchanged marks from last week. The 2-yr yield increased two basis points to 1.63%, and the 10-yr yield increased one basis point to 1.84%. The U.S. Dollar Index fell 0.6% to 97.68. WTI crude climbed 7.3% to $59.20/bbl, as OPEC+ agreed to cut oil production by 500,000 barrels per day during the first quarter of 2020.

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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.

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.

2019-90828 (Exp 3/20)