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Weekly Market Snapshot

October 11, 2019

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

Stock market participants were encouraged by the prospects for a mini-trade deal or truce between the U.S. and China.

The FOMC minutes from the September 17-18 policy meeting showed that officials were divided on the appropriate course of monetary policy (but we knew that already). While several were concerned about the downside risks to the growth outlook, there was no presumption of further action. Chair Powell indicated that balance sheet expansion was on its way, emphasizing that this should not be confused with the Large-Scale Asset Purchase programs (QE) implemented during the financial crisis. On Friday, the Fed’s Board of Governors announced Treasury bill purchases at least into 2Q20 and repurchase agreement operations at least through January. The Fed stressed that “these actions are purely technical measures to support the effective implementation of the FOMC’s monetary policy, and do not represent a change in the stance of monetary policy.” However, they may make an October 30 rate cut less likely.

Next week, the bond market will be closed on Monday for the Columbus Day holiday. The earnings season kicks off on Tuesday. The IMF will release its latest World Economic Outlook. The retail sales report is expected to show moderate growth in September, while the Fed’s Beige Book will provide important anecdotal information on the strength of the consumer, wage pressures, and the impact of tariffs. Thursday brings September data on residential construction (noisy, but an improving trend) and industrial production (likely soft following a surprise gain in August, but watch for revisions). Most of the components of the Index of Leading Economic Indicators are known (we’re missing building permits, but will get those on Thursday), but contributions were mixed in September (the trend has been consistent with moderate growth).


Indices

  Last Last Week YTD return %
DJIA 26496.67 26201.04 13.59%
NASDAQ 7950.78 7872.27 19.83%
S&P 500 2938.13 2910.63 17.20%
MSCI EAFE 1853.25 1849.26 7.75%
Russell 2000 1485.36 1486.35 10.14%

Consumer Money Rates

  Last 1 year ago
Prime Rate 5.00 5.25
Fed Funds 1.80 2.16
30-year mortgage 3.70 4.94

Currencies

  Last 1 year ago
Dollars per British Pound 1.221 1.320
Dollars per Euro 1.097 1.152
Japanese Yen per Dollar 107.48 112.27
Canadian Dollars per Dollar 1.333 1.307
Mexican Peso per Dollar 19.571 19.155

Commodities

  Last 1 year ago
Crude Oil 52.59 73.17
Gold 1512.80 1193.40

Bond Rates

  Last 1 month ago
2-year treasury 1.54 1.76
10-year treasury 1.66 1.84
10-year municipal (TEY) 2.09 2.23

Treasury Yield Curve – 10/11/2019

Chart

As of close of business 10/10/2019


S&P Sector Performance (YTD) – 10/11/2019


Chart

As of close of business 10/10/2019


Economic Calendar

October 14  —  Columbus Day Holiday (bond market closed)
October 15  —  IMF World Economic Outlook
October 16  —  Retail Sales (September)
 —  Homebuilder Sentiment (October)
 —  Fed Beige Book
October 17  —  Jobless Claims (week ending October 12)
 —  Building Permits, Housing Starts (September)
 —  Industrial Production (September)
October 18  —  Leading Economic Indicators (September)
October 24  —  Durable Goods Orders (September)
October 30  —  Real GDP (3Q19, advance estimate)
 —  FOMC Policy Decision
November 4  —  Employment Report (October)
December 11  —  FOMC Policy Decision

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business October 10, 2019.