Market Commentary for Week Ended 12/06/2019

Market Commentary for Week Ended 12/06/2019

Economic Data Recap

The financial headlines on Monday and Tuesday of this week reminded me of last December which, as I am sure you remember, wasn’t very pleasant for US stocks.  Intraday on Tuesday the S&P 500 was down 2.3% from last Friday’s close.  If the market ended the week at these levels, it would have been the worst week since early August.  The decline was due to China-US trade pessimism expressed by Donald Trump.  Alas, the script shifted on Wednesday as there were rumors of trade talk progress.  The market rallied Wednesday.  The market then moved above break-even for the week on Friday after a strong jobs report.  So, it was a bi-polar week for investors as doom and gloom settled in on Tuesday and while the week ended on a very positive note.

Weekly Economic Data of Note

1. 12/2 ISM Manufacturing Index:  The ISM manufacturing surprised to the downside again for the month of November.  The reading came in at 48.1 versus a consensus of 49.4.  This is a leading economic indicator for the manufacturing sector of the US economy.  A reading below 50 indicates a contraction in the sector.   This report sent interest rates lower and may have contributed to the decline in equities on Monday.

2. 12/4 ISM Non-Manufacturing Index:  This ISM report pertains to the service side of the economy.  This also surprised to the downside with a reading of 53.9 vs a consensus of 54.5.  Since the reading is above 50 however the service side of the US economy is still growing, albeit modestly.

3. 12/6 Consumer Sentiment:  The US consumer is very healthy and strong.  The monthly consumer sentiment survey conducted by the University of Michigan came in at 99.2 versus a consensus of 96.9.  This along with the jobs report contributed to a rise in interest rates and equity indexes.

4. 12/6 Jobs Report:  The Jobs Report was very robust for the month of November.  266k jobs were created in November versus a consensus expectation of 180,000.   40k of these jobs were due to the GM strike ending and the company’s workers returning to the workforce.  The unemployment rate dropped back down to 3.5% from 3.6% in the prior month.

Here is a table with the report details (source: econoday.com).