Market Perspective for November 16, 2018

Markets consolidated rally gains this week. The S&P 500 saw the smallest decline of 1.61 percent on the week.

SPDR Consumer Discretionary (XLY) declined 3.32 percent. SPDR Technology (XLK) dipped 2.33 percent following weaker guidance from Nvidia (NVDA) that sent shares of the chipmaker down 20 percent after hours on Thursday.

The National Federation of Independent Business small business confidence index for October slipped from its all-time high in September, but business owners are at their most confident in decades amid low inflation and strong economic growth. The consumer price index (CPI) for October climbed 0.3 percent. The core CPI that strips out food and energy grew 0.2 percent. Both numbers met economist forecasts.

Initial claims for unemployment were 216,000 last week, in the historically low range we’ve seen all year. October retail sales beat expectations with 0.8 percent growth. Sales ex-autos advanced 0.7 percent, also beating forecasts. Higher gasoline prices boosted retail sales with the CPI last month. Autos and department stores also saw strong sales, while restaurants lagged.

That boost in gasoline should evaporate from the CPI in November if the decline in crude oil holds. Crude extended its record losing streak to 12 days this week before bouncing at $54 a barrel. The decline that began in early October wiped out all of crude oil’s gains over the past year. Gasoline tumbled with oil at the wholesale level and that price drop will continue filtering down to the pump in coming days and weeks.

Natural gas gained as much as 30 percent this week, to near $5 per mmBTU before falling back towards $4. The cold snap hitting much of the country coincided with low inventory, driving prices skyward. Investors don’t expect the price increase to hold, however. While natural gas gained about 15 percent on the week, shares of First Trust ISE-Revere Natural Gas (FCG) fell 5 percent.

Shares of PG&E (PCG) rallied nearly 40 percent on Friday, but still finished the week down nearly 40 percent. The stock lost as much as 55 percent midweek as it faces liability for the ongoing wildfire in California.

Emerging markets rebounded strongly with currencies. The U.S. dollar was slightly lower on the week despite Brexit mayhem weighing on the pound and the euro. Prime Minister Theresa May faced a possible vote of no confidence after several cabinet members resigned in protest of her Brexit deal with the EU.


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