It seems like nothing right now can stop investors from pushing markets to new highs, even as data signals persitently worsening economic conditions.
With earnings season in full swing, corporate results have generally been better than expected, showing both short-term profits and positive outlooks for continued economic growth in the longer run. As well, the U.S.-Sino tariff tiff seems to be receding, with the U.S. saying it's “close to finalizing some sections” of the first phase toward a trade deal with China. In addition, interest rates are anticipated to be heading lower.
All four major U.S. indices—the S&P 500, Dow Jones Industrial Average, NASDAQ and Russell 2000—finished last week higher, for the third straight week, buoyed by renewed risk-on sentiment. Moves were fueled by favorable geopolitical developments and hopes economic growth will get back on track.
Some Indices, Stocks Nearing All-Time Highs
The S&P 500 gained 0.41% on Friday with Technology shares leading the advances, +1.21%, after Intel's (NASDAQ:INTC) upbeat outlook on data center chip demand boosted the stock and Apple (NASDAQ:AAPL) shares closed just marginally lower than their all-time, reached on Wednesday.
Amazon.com (NASDAQ:AMZN) slipped, after Friday's earnings release disappointed, but its long-term prospects offset a profit decline.
Trade sensitive Materials rose, +1.09%. Defensive sectors underperformed: Real Estate, -1.23%, and Utilities, -1.02%, led the losses.
For the week, the SPX gained 1.22%. The Energy sector was the obvious leader, +4.37%.
Technically, on Friday, the S&P rose above its 3,025.86 record-close on July 26, but finished the session below it.
The NASDAQ reached its highest level since July 30 and the Russell 2000 climbed to its highest point since Sept. 23.
Risk-on sentiment helped push Treasuries, including the U.S. 10-year note, lower, allowing yields to test last week’s highs. The sovereign bond closed above the 100 DMA for the second time in a week. If yields keep climbing, and move above 1.908, they’d establish a short-term uptrend.
The dollar rose on Friday for a second day, trimming half of last week’s losses. Technically, the Dollar Index found support last week by the 200 DMA. Friday’s high, however was pressured lower so the USD closed below the 100 DMA, as well as below its uptrend line since June.
After French President Emmanuel Macron stopped the EU from delaying Brexit for three months, the pound fell for a second day. This leaves the UK in uncertain territory, just hours before the Oct. 31 Brexit deadline, at which point it will be cut off from the European Union with or without a deal.
Week Ahead
All times listed are EDT
Monday
19:30: Japan – Tokyo Core CPI: expected to rise to 0.7% YoY from 0.5% previously.
Tuesday
10:00: U.S. – CB Consumer Confidence: expected to have increased to 127.4 in October from 125.1.
10:00: U.S. – Pending Home Sales: seen to be at 0.5% for September, down from 1.6% a month earlier.
20:30: Australia – CPI: probably 0.5% from 0.6% QoQ.
Wednesday
4:55: Germany – Unemployment Change: forecast to rise to 5K from -10K previously.
8:15: U.S. – ADP Nonfarm Employment Change: expected to drop to 120K from 135K.
8:30: U.S. – GDP: seen to have declined to 1.7% in the third quarter from 2.0% in the second quarter.
10:00: Canada – BoC Interest Rate Decision: likely to remain at 1.75%.
14:00: U.S. – Fed Interest Rate Decision: forecast to remain unchanged at 2.00%.
21:00: China – Manufacturing PMI: seen to come in flat at 49.8%.
Thursday
6:00: Eurozone – CPI: likely to stay flat at 0.8%.
8:30: Canada – GDP: forecast to remain at 0.2%.
21:45. China – Caixin Manufacturing PMI: likely to have edged down to 51.0 from 51.4.
Friday
5:30: UK – Manufacturing PMI: expected to edge lower, to 48.1 from 48.3.
8:30: U.S. – Nonfarm Payrolls: predicted to post 90K new jobs after last month’s 136K.
8:30: U.S. – Unemployment Rate: seen to edge up to 3.6% from 3.5%.
10:00: U.S. – ISM Manufacturing PMI: expected to edge up to 48.8 from 48.7—still in contraction teritorry.