Market Perspective for November 22, 2019

Equities achieved a new all-time high on Monday, though the markets closed lower for the week. The Nasdaq fell 0.21 percent, the S&P 500 Index 0.31 percent and the Dow Jones Industrial Average 0.46 percent.

Healthcare was the best performing sector. SPDR Healthcare gained 0.83 percent. The pharmaceutical and biotechnology subsectors provided the momentum. iShares Nasdaq Biotechnology (IBB) climbed 3.33 percent and SPDR S&P Pharma (XPH) 3.31 percent.

SPDR Financials (XLF) rose 0.50 percent aided by Charles Schwab (SCHW) announcing a buyout of TD Ameritrade (AMTD). The news boosted shares of both companies. Schwab rallied 8.68 percent and Ameritrade 18.14 percent. iShares U.S. Broker Dealers (IAI) gained 1.65 percent.

Economic data shows a strengthening economy. The November flash manufacturing and service PMIs from Markit came in much stronger than forecast. The University of Michigan’s flash consumer sentiment reading for November was also higher than analysts forecasted. The Philly Fed’s measure of manufacturing activity in its region was up sharply from October.

Housing starts and existing home sales increased in October but came in slightly below estimates. Building permits were stronger than predicted. The National Association of Homebuilders’ homebuilder confidence index was 70 in November, down 1 point from October, but still hovering near post-2008 highs.

Initial claims for unemployment matched the prior week’s figure of 227,000.

While the U.S. economy shows strength, Europe, Japan, the United Kingdom and Australia all reported flash PMIs below the 50 level, indicating contraction. The U.S. Dollar Index finished at a six-week high.  iShares MSCI EAFE (EFA) declined 0.50 percent for the week and iShares MSCI Emerging Markets (EEM) slid 0.60 percent.

Bond yields fell this week. The 10-year Treasury yield dipped to 1.77 percent. Corporate and investment grade bonds rallied. Fidelity Corporate Bond (FCOR) advanced 0.47 percent.

Retail earnings season has been generally positive with major retailers such as Wal-Mart (WMT) and Target (TGT) delivering good news. TGT gained 12.86 percent after a solid report this week. Home improvement retailers Home Depot (HD) and Lowe’s (LOW) diverged following their earnings reports. HD fell 8.14 percent for the week, while LOW gained 2.29 percent. Auto auctioneer Copart (CPRT) rallied 3.84 percent.


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