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Weekly Update

Market Summary

Global equity markets reacted positively to an eventful week of economic and geopolitical news and corporate earnings results. For the week, U.S. equities posted some of the best global gains with the Dow, S&P 500, and NASDAQ returning 1.3%, 1.6%, and 1.7%, respectively, while international markets broadly generated returns of 0.8%, per the MSCI All-Country World Index excluding the United States. The primary drivers for U.S. stocks were better than feared fourth quarter earnings results for major multinational technology and industrial companies, a strong jobs report, and positive takeaways from the Federal Reserve meeting on Wednesday.

Corporate earnings season for the fourth quarter has nearly hit the halfway point with companies broadly performing better than anticipated thanks to a low bar set from depressed investor sentiment at the end of last year. Of the half of the S&P 500 constituents that have reported to date, almost 70% have exceeded earnings expectations and 60% have beaten revenue expectations, according to FactSet. However, FactSet also reported that corporate earnings year-over-year growth expectations for the first quarter of 2019 have fallen into negative territory with a consensus projected earnings growth rate of -1.2% for the S&P 500 compared to the first quarter of 2018.

Federal Reserve Chairman Jerome Powell said all the right things to give investors a sense of relief following last Wednesday’s FOMC meeting. His remarks indicated a notable shift in the Federal Reserve’s monetary policy to a much more accommodative stance with a near-term pause in interest rate hikes likely, and he added that the Fed’s balance sheet would remain larger than previously anticipated.

Following last week’s trade meeting between the U.S. and China, President Trump was optimistic that the world's two largest economies could reach "the biggest deal ever made" and confirmed that a U.S. delegation will visit China in mid-February for a new round of trade talks. China's trade delegation said the latest negotiations with the U.S. in Washington made "important progress" and focused on the three key themes of trade, structural issues, and enforcement.

Economic Highlights:

Employment: A strong January jobs report eased worries about a potential economic slowdown. Alongside January's 304K job gain, November's figure was revised higher too. The last three months have now seen an average monthly addition of 241K jobs. The unemployment rate unexpectedly moved higher to 4.0% thanks to a rise in the labor force participation rate to 63.2% from 63.1%.

Manufacturing: The January ISM manufacturing index reading came in at 56.6, which was above expectations and the prior month reading of 54.2 and 54.3, respectively, after a notable drop-off in December.

US Economy – The Week Ahead

Tuesday 2/5/2019

  • ISM Non-Manufacturing PMI – Consensus Estimate: 57.0 (-1.0% MoM), Prior Month: 57.6 (-5.1% MoM)

Wednesday 2/6/2019

  • Trade Balance – Consensus Estimate: -$54.0B (2.7% MoM), Prior Month: -$55.5B (-3.4% MoM)

Thursday 2/7/2019

  • Initial Jobless Claims – Consensus Estimate: 227,000 (-10.3% WoW), Prior Week: 253,000 (26.5% WoW)
  • Consumer Credit Outstanding – Consensus Estimate: $17.0B (-23.1% MoM), Prior Month: $22.1B (-11.3% MoM)

Friday 2/8/2019

  • No Data
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