This week has given us positive moves in equity markets. The S&P 500 is up 1.77%. This strong move comes as we see a slight sliver of light in the tunnel that is the Sino-American trade negotiations. Talks seem to be moving in the right direction as we passed the October 15 deadline with no tariff increase.
Equities bounced back this week with domestic large caps outperforming small caps. The S&P 500 was up 1.2%, whereas small caps were flat. Bond yields inched higher resulting in little change in the Bloomberg Barclays Aggregate Bond Index. Emerging market and foreign developed equities underperformed in the United States.
Equities rallied sharply on Friday following a decent monthly jobs report where 136,000 net adds were reported.
The markets are not a fan of the global manufacturing numbers coming out. This week’s returns may indicate equity markets actively don’t like the manufacturing numbers. The S&P 500 was down 2.5% for the week as of yesterday. This is the lowest weekly level since the beginning of August.
We are seeing the impact of the trade conflict on global manufacturing.
Equities were soft this week with the S&P 500 losing 0.7%. The broad index fared better than both domestic small caps and emerging markets which were down 1.1% and 1.5% respectively. Markets continue to face a plethora of crosscurrents. New this week was the announcement of a Presidential impeachment inquiry.
The big news this week was the drone attack on the Abqaiq oil facility in Saudi Arabia. The attack impacted 5% of the global oil supply. Crude oil prices were up 13% the first trading day after the attack, but prices have since moderated. The moderation is due to the Saudis announcing they expect most of the production at the facility to be up and running by the end of the week.
Equities rallied on the week, led by a surge in small caps. The S&P 500 gained a solid 2.2% on the week, but the laggard Russell 2000 rocketed more than 6%. There was a massive rotation within equities as momentum names were hit extremely hard and forgotten value names surged.
Second quarter GDP revisions show slower growth than was expected. The revision shows GDP growth of 2%. This is down from the initial reading of 2.1%. The downward revision is due to lower than expected local government spending, exports, private inventory investment, and residential investment. Strong personal consumption expenditure (PCE) was the major positive contributor to the growth.
The S&P 500 fell 1.2% on the week aided by a 2.6% drop on Friday where both China and the United States increased retaliatory tariffs. Small cap equities continue to be weak and fell 2.5% on the week. Small cap equities have underperformed the S&P 500 by 10% over the last six months.
Markets traded up 2.7% after last week’s trade off. Some of the pop may be attributed to the strength in earnings reports for retail companies this week. Retail is not dead yet, and it looks like traditional retail companies are gearing up for a marathon. Most of the growth in retail sales came from e-commerce, which is expected.
The S&P 500 fell 2.9% on Wednesday, the second occurrence this month, and erased previous gains for the week. The index is down about 6% from highs reached in July. Emerging Markets continue to lag and are down more than 24% from their high set back in January 2018. Gold continues to be one of the best performing assets as it benefits from the big drop in real yields.