Economic Market/Portfolio Happenings
Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
All data is for the week ended October 18, 2019.
Equities around the globe advanced last week despite a release from the International Monetary Fund (IMF) which downgraded this year’s global economic growth to 3% and slightly revised down global growth for next year to 3.4%. The S&P 500 rose 0.55%, the Russell 2000 advanced by 1.57% while the NASDAQ edged up by 0.40%. Overseas the international developed markets (MSCI EAFE) gained 1.24% as the emerging markets (MSCI EM) rose 1.27%. Within the US the best performing sectors were health care and real estate. (1)
Interest rates were flat for the benchmark 10-year US Treasuries while the 2-year fell and the 30-year rate rose, thus steepening the yield curve, seen as a positive for the economy. (1) Meanwhile the futures market is putting an 89% probability of a quarter point rate hike by the Federal Reserve Board when it meets at the end of this month. (2)
Oil prices declined 1.5% last week on a report that inventories rose at a faster pace than expected. The IMF report of slower global economic growth also pressured expected demand and thus oil prices lower. Year to date, oil prices are up 18.8% to $53.87 per barrel. (3)
Manufacturing was stronger than anticipated in the N.Y. Empire State Manufacturing survey following several months of flat results due to the trade war with China. Employment and hours worked both increased modestly last month as deliveries were much stronger than expected, nearly doubling to 13 from the prior month. Note anything above zero indicates expansion. Prices increased at a slower pace than last month: the prices paid index moved down six points to 23.1 and the prices received index slipped three points to 6.3, which indicates expanding profit margins. (4)
Industrial output declined in September by 0.4% from the prior month versus the consensus estimate of a 0.3% drop pressured by reduced production at Boeing and the strike at General Motors. August figures were adjusted upward, for a 0.8% gain. For the quarter, industrial output rose at a 1.2% annual rate. (5)
Retail and food service sales for September came in below estimates, while the August report was adjusted higher. Excluding volatile auto and gas sales, September retail sales rose 4.5% year over year. Included in that number is a 12.9% gain for internet retailers. While still preliminary, the numbers may reflect higher consumer spending in August in anticipation of higher prices due to expected tariffs on Chinese produced items. (6)
Proprietary portfolio happenings:
Bank of America Corp. (BAC), a G50 holding, shares rose 5% following the quarterly earnings report including in-line revenues and beat EPS estimates on loan growth and fee income while reserves for loan losses were down, indicating improved credit quality. (7)
Pure Storage Inc. (PSTG), a G33 holding, rose 6.1% also following upgrades to the stock’s ratings from two major Wall Street firms.
eHealth Inc. (EHTH), a G33 holding, rose 6.6% following upgrades to the stock’s ratings from two major Wall Street firms.
UnitedHealth Group (UNH), a G50 and Core Select holding, reported quarterly results that beat analysts’ expectations and management increased expectations for 2020. As a result, shares rose 10.5% for the week.
Did You Know? If you were to lose your sense of direction while strolling in New York’s Central Park, fear not. The lamp posts in Central Park feature a set of four numbers that can help you navigate. The first two tell you the nearest street, and the next two tell you whether you're closer to the east or west side of the park. Even numbers signify east and odd numbers signify west.
Sources: (1) JP Morgan Weekly Market Recap 10-21-19, (2) Barron’s “Gold Could Get a Boost from a Weak Dollar” 10-19-19, (3) Oilprice.com, “API: Supersized Crude Build Sends Oil Prices Down” 10-16-19, (4) Empire State Manufacturing Survey 10-14-19, (5) Trading Economics Industrial Output, (6) US Census Bureau Monthly Retail Trade 10-16-19, (7) Bank of America Third Quarter press release, (8) UnitedHealth Group press release 10-15-19