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 December 6, 2019.
US and European stocks finished the week in positive territory despite initially dropping after the president commented he could delay a US-China trade deal until after the 2020 elections, implying new tariffs on Chinese goods would be applied next Saturday. This followed news that he was reviving tariffs on South American steel and proposing tariffs on French imports in retaliation for recently imposed French tariffs on large US technical companies. Consumer data (see Economic Data below) revived the stock markets. For the week the S&P 500 rose 0.21%, the Russell 2000 added 0.59% and the NASDAQ slipped 0.08%. International developed stocks (MSCI EAFE) rose 0.38% and emerging market stocks added 0.88%. Within the US, energy and consumer staples were the best performing sectors while the industrials and consumer discretionary sectors lagged.
With the combination of better than expected employment and consumer confidence (see Economic Data below), the odds of a further rate increase by the Federal Reserve improved, driving interest rates up and bond prices down following Friday’s reports. For the week, the benchmark 10-year US Treasuries yield rose 6 basis points to 1.84% and the yield curve increased slightly. (2)
Oil prices gained 7.3% last week to $59.20 per barrel (3) following two positive reports. First, US crude supplies fell, reversing direction from five weeks of increases. Second, OPEC and its allies met and appear to be ready to cut oil production on top of their current agreement to reduce supplies.
Confirming the consumer remains healthy and supportive of economic expansion, our nation added 266,000 new jobs last month and the prior two months were revised up by 41,000, surprisingly strong with gains almost across all job categories.4 It brought the unemployment rate down a tick to 3.5%. Meanwhile, new applications for unemployment benefits (a measure of layoffs) at the end of November fell to the lowest level in 7 months, ahead of expectations, and returned close to a 50-year low. (5)
Consumer confidence as measured by the U of Mich. gained this month, with their index rising 2.4 points to 99.2 versus expectations for a flat index. Particularly strong were households with incomes in the top third of the distribution as their reading was the 3rd highest in the past 20 years buoyed by higher stock prices and declining inflation expectations. (6)
ISM manufacturing index sank to 48.1% in November from 48.3% in October. Construction spending declined 0.8% in October, below the 0.5% gain of the prior month and expectations for 0.4% growth. (7)
Proprietary portfolio happenings:
Bristol-Myers Squibb (BMY), a G50 and Core Select holding, shares rose 5.3% last week on four separate drug successes from their pipeline which displayed the company’s improved diversification across diseases and drugs. (8)
Five Below (FIVE), a G33 holding, reported sales and earnings that exceeded expectations and raised guidance for the full year. (9)
Mastercard Inc. (MA), a G33 holding, announced that its board of directors increased its dividend by 21%. The board also authorized a repurchase of $8 billion of its Class A common stock representing 3% of its total shares outstanding at current values. (10)
Several holdings in our Energy Sector Focus portfolio benefited from higher oil prices last week (see Commodities above), with shares rising 4-9% last week.
Did You Know? Last week’s Cyber Monday generated over $9 billion in sales according to Adobe Analytics data, up 17% from the prior year and blowing out expectations. That figure included nearly $3 billion in sales over smartphones—a 46% surge from a year ago.
Sources: (1) JP Morgan weekly Market Recap 12-9-19, (2) US Treasury, (3) Oilprice.com, (4) Bureau of Labor Statistics 12-6-19, (5) US Department of Labor 12-5-19, (6) University of Michigan Survey of Consumers 12-6-19, (7) Institute for Supply Management Manufacturing Index 12-2-19, (8) Bristol Meyers press releases 12-6 through 12/8/19, (9) Five Below press release 12-4-19, (10) Mastercard Inc. press release 12-3-19