US and International Equities
This week, as some of the economic news was pointing to worries of a potential economic slowdown, some areas of the stock market are looking ahead to a potential economic recovery. Stocks continued to climb this week despite some disappointing economic data as market participants set aside the short-term bumps and looked ahead toward a continuing recovery.
The markets received more positive vaccine news from Moderna this week, continuing the theme that a potentially effective vaccine to combat COVID-19 could be approved soon. However, the broad market took the news in stride, with the S&P 500 finishing lower for the week.
The biggest sector winner this week was energy, returning approximately 5% after being down almost 50% at one point this year. The sector has been a major detractor to S&P 500 performance and is still down over 35% year to date. Low energy demand due to COVID-19 along with a push toward alternative energy sources have weighed on the sector’s performance. However, the sector appears to be rebounding for a second straight week.
The industrials and materials sectors both finished the week on a positive note. Materials have outperformed the S&P 500 year to date. For the last month, both sectors have outperformed the S&P 500. Back in August, LPL Research upgraded the materials sector on US dollar weakness and technical momentum. For further insight, please read the Weekly Market Commentary titled Top 10 Investor Questions. Market participants appear to be anticipating better times for both sectors.
Small and mid-caps enjoyed another solid week, the third week in a row small caps have been among the top performers. LPL Research recently upgraded small caps to neutral now that a likely new economic expansion has gained some steam. For more of our thoughts on small caps, please read the Weekly Market Commentary, Three Reasons We Like Small Caps.
International markets had another positive week. Emerging markets (MSCI EM) outperformed their developed international counterparts, as denoted by the MSCI EAFE, by a few percentage points.
Fixed Income, Currencies, and Commodities
Bonds, as represented by the Bloomberg Barclays US Aggregate, finished higher for the week. Likewise, the 10-year Treasury traded higher as well. Most bond sectors finished in the green to end the week.
Commodities posted another mixed week. Oil ended the week higher, up over 5%, marking the third consecutive week of gains. Natural gas sold off to end the week over 10% lower, but is still up over 20% year to date. For the second week in a row, gold and silver ended the week lower, while copper finished higher.
US and International Economic Data Recap
For October, headline retail sales rose 0.3% month over month. This was below FactSet consensus expectations of 0.5% and down from the September level of 1.6%, marking the slowest pace of growth in six months. Despite the slower-than-expected monthly growth, retail sales grew 5.7% year over year. Growth in motor vehicle sales remains a strong point in the underlying data (source: US Census Bureau).
On Thursday, the Conference Board released its Leading Economic Index (LEI) report for October, and it showed the series rose 0.7% month over month. While this number still signals continued future economic growth, it reinforces that the pace of the recovery is slowing. We examine the implications for future economic growth in the LPL Research Blog Leading Indicators Signal Economic Recovery Slowing.
It appears that global growth momentum could be starting to wane. Fresh restrictions in Europe and the United States could increasingly threaten the near-term outlook. A double-dip recession in Europe is possible, while US growth may stall while we wait for vaccines. We look at high-frequency economic indicators in Europe to gauge the effects of the latest round of COVID-19 lockdowns in the LPL Research blog Europe’s Lockdown 2.0 May Be Smarter.
This week, jobless claims came in higher than expected. After several weeks of improvement, weekly jobless claims spiked (source: US Department of Labor). Over 740,000 Americans filed for unemployment insurance. This was above the Bloomberg estimates of 700,000. Continuing claims beat estimates, coming in at 6.37 million versus estimates of 6.4 million. The rise in jobless claims comes as several areas of the country begin to tighten restrictions amid rising COVID-19 cases.
Next week, the following economic data is slated to be released:
- On Monday, we get data on November’s Markit Purchasing Managers Index.
- Tuesday we’ll see September’s S&P/Case-Shiller’s Home Price index data along with November’s Conference Board Consumer Confidence survey.
- Wednesday is all about Q3 GDP, October durable orders, and personal income and consumption expenditures. Moreover, October wholesale inventories and November Michigan sentiment are announced. In addition, Wednesday provides investors another weekly initial unemployment claims report.
Have a happy and safe Thanksgiving holiday!
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References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. All market and index data comes from FactSet and MarketWatch.
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