Overview: U.S.-China trade relations continued to dominate markets last week. Stocks retreated from their multi-week rally, with the S&P 500 down about -0.3% for the week. Midway through the final quarter, major stock indices around the globe are up between 4-5% since October 1 and remain solidly in positive territory for the year-to-date. U.S. Treasury yields fell in a flight-to-safety trade last week, ending with the 10-Year down 6 basis points (bps) to 1.77% as progress on the “phase one” deal stalled. Yields have fallen almost 1% across the yield curve in 2019. For example, the 10-year Treasury began the year at 2.7% (now 1.77%), and the 2-year Treasury has improved to 1.62% from a starting level of 2.5%. Bond prices have benefited as a result, with the taxable Bloomberg Aggregate Index up about 8.6%, and the Bloomberg Municipal Index up 7% year-to-date 2019.
Last week’s U.S. economic reports were encouraging, as the purchasing managers indices (PMI) for manufacturing and services rose to multi-month highs. Strong corporate earnings reports led by the likes of Target and Lowe’s indicate consumers continue to support economic growth. October’s FOMC meeting minutes released mid-week reinforced the Fed’s “wait-and-see” approach, with most members indicating the three 0.25% cuts to the fund’s rate in 2019 as sufficient.
This week: The Thanksgiving holiday-shortened week may see a slowdown in trading activity. Investors will evaluate trade data on Tuesday, and a plethora of data on Wednesday, including durable goods, the third-quarter GDP report, and consumer spending and personal income. Progress in the much-anticipated trade deal will remain a focus.
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