Stock Indices ended the week mixed with the Dow and the S&P500 down but the Nasdaq up slightly and larger gains in the Russell 2000 and international indices. We now have 2 vaccines at or near application for emergency authorization with phase 3 trials showing high effectiveness and safe. However, it will be months before they become widely available. We expect the virus cases and the economy to get worse before it gets better.
The tug of war in the markets will be between companies that have benefited from the pandemic versus those that are hurt by the pandemic. It will be companies involved in housing, home improvement, online shopping and work from home versus the beat up energy, airlines, restaurants, resorts and leisure. Last week’s rotation into the beat up sectors reversed some this week. We expect this seesaw effect to continue for some time. Factset earnings insight pointed out this week that excluding the large declines in oil and gas, airlines, hotels, restaurants and leisure, third quarter earnings would actually be up 4% from last year.
Treasury yields fell with the 30-year bond yield at 1.625% and the 10-Year note at 0.875%. Crude oil rose to $42.17 a barrel and natural gas fell to $2.774 per MMBTUs. The U.S. dollar index fell to 92.73 and gold prices fell to $1869.60 an ounce.
In the economic numbers this week:
- Japan reported that it’s economy expanded 21.4% in the third quarter on an annualized basis. However, this follows three consecutive quarters of declines with a 28.8% rate of decline in the second quarter.
- China reported that industrial output rose 6.9% in October from October 2019.
- The National Association of Realtors reported that existing-home sales rose 4.3% in October from September to the highest level since February 2006. From a year earlier the median existing-home price rose 15.5% from a year ago.
- The Commerce Department reported that retail sales rose 0.3% in October from September. This was the smallest increase since May. Spending on Vehicles, electronics and home-improvement stores increased but grocery, clothing and restaurant spending decreased.
- The Federal Reserve reported that industrial production rose 1.1% in October. This follows a revised 0.4% decline in September. Still output is 5.6% below February levels. Manufacturing rose 1% and utility production rose 3.9% while mining output, including oil and gas production, fell 0.6%.
- The Labor Department reported:
- A seasonally adjusted 742,000 workers filed initial claims for unemployment in the week ending November 14th up 31,000 from a revised 711,000 the week before as virus restrictions created more layoffs.
- Continuing claims for regular unemployment fell from 6.8M M to 6.4MM in the week ending November 7th.
- A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 21.1MM to 20.3MM as of October 31h.
- For the full report go here: https://www.dol.gov/ui/data.pdf .
- The EIA weekly oil report is here http://ir.eia.gov/wpsr/wpsrsummary.pdf . Also, the EIA reported in the past week:
- Field production of crude oil was rose from 10.5MM barrels per day to 10.9MM barrels per day.
- Natural gas storage rose by 31BN cubic feet and is above the average level at this time of year during the past five years.
- Baker Hughes reported the number of active oil rigs fell 5 to 231. The number of active natural gas rigs rose 3 to 76.
- Factset reported for S&P500 companies reporting Q3 earnings so far the blended earnings decline from Q3 2019 is 6.3%.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA Erik A Smith AIF®
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.