Market Watch

The Markets (as of market close October 31, 2019)

Investors continued to buy stocks, pushing values higher in October. Each of the benchmark indexes listed here posted solid monthly gains despite signs that the economy is slowing, both domestically and globally. Businesses remain hesitant to invest in nonresidential structures, equipment, and software, exports are lagging in volume, and prices remain subdued. Manufacturing continues to wane, and residential sales have been erratic at best. However, there may be headway in the negotiations between the United States and China, as the two economic giants try to resolve their ongoing trade war (although rhetoric from either side changes almost daily). The labor market continues to add new jobs, although wage inflation was muted last month. Since the beginning of the year, interest rates have been reduced by 75 basis points to their lowest levels since May 2018. The last day of the month saw the House of Representatives pass a resolution establishing a framework for a new phase of the impeachment inquiry.

By the close of trading on the last day of the month, each of the benchmark indexes listed here posted gains, led by the tech stocks of the Nasdaq, which climbed more than 3.50% from its September closing value. The large caps of the S&P 500 and the small caps of the Russell 2000 each gained over 2.0% by the end of October, while the Global Dow was close behind. The Dow advanced on the month, but by less than 0.50%. The yield on long-term bonds fluctuated during the month, ultimately closing October about where it began.

By the close of trading on October 31, the price of crude oil (WTI) was $54.09 per barrel, down from the September 30 price of $54.37 per barrel. The national average retail regular gasoline price was $2.596 per gallon on October 28, down from the September 30 selling price of $2.642 and $0.215 less than a year ago. The price of gold rose by the end of October, climbing to $1,515.10 by close of business on the 31st, up from its $1,479.30 price at the end of September.

 

Market/Index

2018 Close

Prior Month

As of Oct 31

Month Change

YTD Change

DJIA

23327.46

26916.83

27046.23

0.48%

15.94%

NASDAQ

6635.28

7999.34

8292.36

3.66%

24.97%

S&P 500

2506.85

2976.74

3037.56

2.04%

21.17%

Russell 2000

1348.56

1523.37

1662.45

2.57%

15.86%

Global Dow

2736.74

3021.34

3081.07

1.98%

12.58%

Fed. Funds

2.25%-2.50%  

1.75%-2.00%  

1.50%-1.75%  

25 bps

-75 bps

10-year Treasuries

2.68%

1.67%

1.69%

2 bps

-99 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Employment: The unemployment rate declined 0.2 percentage point to 3.5% in September. The last time the rate was this low was in December 1969, when it also was 3.5%. Total employment increased by 136,000 in September after adding 168,000 (revised) new jobs in August. The average monthly job gain so far in 2019 is 161,000 per month (223,000 in 2018). Notable employment increases for September occurred in health care (39,000), professional and business services (34,000), government (22,000), and transportation and warehousing (16,000). The number of unemployed persons dropped by 275,000 to 5.8 million. The labor participation rate remained at 63.2%, and the employment-population ratio rose to 61.0% (60.9% in August). The average workweek remained at 34.4 hours for September. Average hourly earnings fell by $0.01 to $28.09. Over the last 12 months ended in September, average hourly earnings have risen 2.9% (3.2% for the 12 months ended in August).

FOMC/interest rates: By an 8-2 vote, the Federal Open Market Committee dropped the target range for the federal funds rate 25 basis points following July’s 25-basis-point cut and September’s comparable rate slash. The federal funds rate range has been decreased by 75 basis points so far this year. The target range now sits at 1.50%-1.75%. In support of its decision to reduce interest rates again, the Committee noted that inflation continues to run below the Fed’s 2.0% target rate, business fixed investment and exports have weakened, and global economic developments are uncertain.

GDP/budget:Economic growth slowed again in the third quarter. According to the initial estimate for the third-quarter gross domestic product, the economy accelerated at a rate of 1.9%, down from the second quarter’s 2.0% annual growth rate. The first quarter saw an annualized growth of 3.1%. The personal consumption expenditures price index increased 1.5% in the third quarter compared to an increase of 2.4% in the second quarter. Driving economic growth in the third quarter was consumer spending, which increased at an annualized rate of 2.9% (4.6% in the second quarter). Another positive from the report comes from residential investment, which rose 5.1% — the first positive contribution to the GDP since 2017. Nonresidential (business) fixed investment continues to lag, falling 3.0% in the third quarter after dropping 1.0% in the second quarter. September marked the close of the 2019 fiscal year for the federal government. For the month, the federal budget came in at a smaller-than-expected surplus of $82.2 billion in September, narrowing the fiscal 2019 deficit to $984.4 billion, still 26.4% higher than the fiscal 2018 deficit.

Inflation/consumer spending: According to the personal income and outlays report, inflationary pressures remain weak, as prices for consumer goods and services rose less than 0.1% in September. Prices are up 1.3% over the last 12 months. Consumer prices excluding food and energy showed no movement in September and are up 1.7% year-over-year. On the other hand, consumers continue spending, as purchases rose 0.2% (0.2% in August). Personal income and disposable (after-tax) personal income each climbed 0.3% in September (0.5% and 0.6%, respectively, in August).

The Consumer Price Index was unchanged in September following a 0.1% advance in August. Over the 12 months ended in September, the CPI rose 1.7%. Energy prices fell 1.4% on the month with gasoline down 2.4%. Prices less food and energy rose 0.1% in September after increasing 0.3% the previous month. Since last September, core prices (less food and energy) are up 2.4%.

Eye on the Month Ahead

While stocks rebounded nicely last month, will that trend continue in November? Stock market growth seemingly rides on the progress made in the trade negotiations between the United States and China. With the impeachment process moving on to another phase and the government on target to shut down by the middle of November, it should be an interesting fourth quarter.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.

IMPORTANT DISCLOSURES
This material was prepared by Broadridge Investor Communication Solutions, Inc. This information is believed to be from reliable sources; however, no representation is made as to its accuracy or completeness. This information does not constitute tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty, nor is it a solicitation or recommendation to purchase or sell any insurance or investment product or service, and readers should not rely upon it as such. Readers should seek such advice from their own tax or legal counsel or financial professional. Securities, investment advisory and financial planning services through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 6 Corporate Drive, Shelton, CT 06484. Tel: 203-513-6000.

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