Strong third-quarter GDP halted an overnight drop in FANG stocks and elevated indexes on Friday. Economic growth hit an annualized 3.5 percent on the quarter, beating the consensus forecast of 3.3 percent. Personal consumption climbed 4.0 percent, up from 3.8 percent in the prior quarter. Inventories expanded as businesses prepared for the holidays, generating 2 percentage points of GDP growth. Imports shaved 1.3 percentage points off GDP growth.
Flash manufacturing and service PMIs reflected strengthening in October. New home sales missed estimates but remained at the low end of the expansion range seen since 2011. Initial claims for unemployment hovered near four-decade lows at 215,000. Durable goods orders rose 0.8 percent, beating a forecast decline of 1.9 percent.
Fed officials’ public remarks this week focused on the potential for additional interest rate increases given incoming data. Although it briefly boosted bond yields, the slide in equities pushed December rate hike odds to 70 percent.
The U.S. Dollar Index gained 0.7 percent this week. Crude oil declined 2.4 percent, up from a loss of 4 percent midweek. iShares 20+ Year Treasury (TLT) gained 1.13 percent as interest rates fell. The 10-year treasury yield closed at 3.08 percent on Friday, down from Monday’s close of 3.20 percent.
Earnings were responsible for much of the week’s volatility. Companies that disappointed investors were hit with steep losses. Advanced Micro Devices (AMD) fell more than 30 percent on the week after it disappointed. Amazon (AMZN) slid more than 10 percent. Equifax (EFX) shares lost more than 20 percent as costs associated with that scandal bit into profits. Caterpillar (CAT) and 3M (MMM) hurt the Dow Jones Industrial Average after they missed earnings. Shares fell 12.39 and 7.45 percent, respectively, on the week. Even Budweiser (BUD) suffered a loss of 11.66 percent following earnings.
Semiconductor supplier Teradyne (TER) fell only 1.28 percent on the week after strong earnings boosted shares more than 8 percent midweek. Boeing (BA) gained 0.84 percent on the week. McDonald’s (MCD) was a standout gainer, rising 3.49 percent after positive earnings.
The past few weeks have been challenging for investors. Nevertheless, the economy continues to improve. This most recent sell-off was inevitable, given the run-up in technology stocks in 2018.
If you are concerned with recent volatility and your current portfolio allocations, we would be happy to provide you with a complimentary review. We can help you determine if your portfolio is properly positioned for current market conditions and discuss if there are changes you should consider. Please call us at (844) 336-9878 ext. 1006 to learn more.