Market Update - November 5, 2019Submitted by Jodi Vleck , Beta Wealth Group on November 4th, 2019
For the week ended November 1, U.S. equities fared well on the back of better-than-expected earnings results, along with an easing Federal Reserve and positive surprises from Friday's employment report. The week was largely devoid of any major U.S.-China trade news other than reports of a ‘constructive’ conference call between the two nations. By sector, healthcare rose over 3% with strong earnings results from dominant blue chip companies such as Pfizer, while energy was the worst-performing sector for the week losing ground as oil prices fell.
With nearly three-quarters of companies in the S&P 500 having reported earnings, most firms have reported better-than-expected results, with year-over-year revenue up 3% while the corresponding earnings growth is a tamer -2.7%. This makes it the first time the S&P 500 index has recorded three consecutive quarters of earnings declines since the period from late-2015 through mid-2016. On the economic front, strong employment data for October offset weak manufacturing metrics.
Foreign equities rose on the back of the European Union’s extension of Brexit negotiations by an additional three months, even as the European Central Bank (ECB) held rates steady while restarting its program of asset purchases (of €20 bil./month). Emerging markets rose strongly in local currency terms featuring gains in most of the BRIC nations.
Fixed income markets gained across the board, as Fed easing brought down general yield levels. U.S. investment-grade bonds across both the government and corporate segments rose largely in line, while high yield bonds and senior loans each lost a bit of ground. Foreign bonds, especially developed market sovereigns, rose partly on the back of a falling dollar.
Commodities were largely flattish for the week despite the tailwind of a weaker U.S. dollar. While the price of crude oil fell by nearly a percent to just over $56/barrel based on oversupply fears, natural gas prices spiked by nearly 10% due partly to cooler-than-expected weather in the East coast.