No to negative rates. Markets in a confirmed uptrend. Gobble, Gobble…

Last week, US equity markets managed to gracefully give back some recent weekly gains. The modest reset came as a result of several familiar variables, including a lack of visibility into the near-term outlook, or news on the US/China trade front, as well as some uneven economic data.

That said, we closed out the week on a positive note on Friday, underscoring the resilience of our ongoing rally. On Friday, the Nasdaq composite gained 0.16%, the S&P 500 ticked higher by 0.22%, and the Dow Industrial Average rose 0.39%. Volume on Friday fell on both the Nasdaq (-8.76%) and the New York Stock Exchange (-13.08%).

There are now less than six full weeks left for trading in 2019, believe it or not. All three major equity market indices are trading close to record highs after six weekly gains leading up to last week. Markets appear to be well-positioned to add to recent gains as leadership stocks continue to act well after breaking out recently. Additionally, markets internals are constructive, investors sentiment has remained contained, and the current outlook for equities remains “confirmed uptrend.”

In terms of last week’s economic data, we started the week with stronger-than-expected housing starts for October (1.314 M vs. 1.320 M). September’s results were revised modestly higher as well.

The EIA Petroleum Status Report for the week ending 11/15 reflected relative equilibrium and a tame supply/demand landscape across all three verticals.

The FOMC minutes from the meeting in October, released mid-week, provided little volatility for traders to work with as the narrative laid out by officials in recent weeks has clearly made the case for a “hold” on rates into year-end.

Weekly Jobless Claims matched the previous week’s revised reading (227K).

The Philadelphia Fed Business Outlook Survey for November was released on Thursday. Econoday consensus was 7.0. The actual reading came in at a stronger-than-expected 10.4.

This holiday week’s abbreviated economic calendar is not short on action items. Away from Chairman Powell’s speech today, there are Fed manufacturing releases from Dallas and Richmond. On Tuesday we receive the International Trade in Goods data for October.

On Wednesday we receive the Durable Goods Orders data for October. This report has reflected some softening in recent months. In September for example, new orders M/M was -1.1%; Ex-transports M/M was -0.3%; Core capital goods M/M was -0.5%. Not exactly earth-shattering news, but worth keeping an eye on, particularly in light of the ongoing US/China trade talks.

Q3 GDP (p) is released on Wednesday as well. Econoday consensus is 1.9%, matching our last reading. Real consumer spending is the focus here. It has been enormously important in fueling the ongoing economic expansion. In the last reading, consumer spending Q/Q was 2.9%. To the extent that we continue to see a strong job market, elevated consumer confidence, and sentiment and rising wages, consumer spending should continue to provide a constructive underpinning to the economy and markets.

In light of the significance of personal income and outlays in relation to the US economy and the potential for its continued expansion, Wednesday’s release of that data is significant. According to Econoday, the expectations for the report are as follows:
Personal Income M/M change: 0.3%
Consumer Spending M/M change: 0.3%
PCE Price Index M/M change: 0.3%
Core PCE Price Index M/M change: 0.2%
Personal Income Y/Y change: 1.4%
Core PCE Price Index Y/Y change: 1.7%

Flickr photo: by jim.choate59
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