U.S. MARKETS SET RECORDS AGAIN AS A PHASE ONE AGREEMENT WITH CHINA IS ANNOUNCED AND THE FED STANDS STILL ON RATES

• U.S. stocks turned in more record highs after it was announced that a Phase One trade deal between the U.S. and China was reached, helping avoid tariffs scheduled to take effect on December 15th
• NASDAQ led the major U.S. indices again this week with a gain of 0.9%, followed closely by the S&P 500\’s return of 0.7% and the DJIA\’s gain of 0.4%
• The markets digested a lot this week and there were three major issues rotating for front–page coverage: the China trade dispute, Brexit and the Federal Reserve
• The China trade dispute has impacted markets for close to 2 years and a Phase One agreement eased investors’ worries that it would continue
• Across the pond, U.K. prime minister Boris Johnson received strong endorsement after his party won the majority in the general elections, helping eliminate some of the political tension as Brexit negotiations continue
• The Federal Reserve, as expected by most, left interest rates unchanged and telegraphed a pause through 2020
• Nine of the 11 S&P 500 sectors finished higher, with the Information Technology sector jumping 2%, padding its lead overall YTD versus all the other sectors
• Real Estate, on the other hand, had a poor week, dropping 2.6%
• U.S. Treasuries saw more volatility but once again ended the week mostly unchanged as the 2–year inched down to 1.60% and the 10–year barely moved down to 1.82%
• The U.S. Dollar Index fell 0.5%
• WTI crude rose 2.8% and came to rest just north of $60/barrel

Weekly Market Performance

Closing the Decade on a High Note

As 2019 and this decade both come to a close with just 11 trading days left, the markets continue to reach new record highs, extending the record–breaking expansion further.

This week it was the news that the U.S. and China agreed to a Phase One trade deal which would suspend additional tariffs. Specifically, it was announced that:

• The tariff rate on $250b of Chinese imports will remain at 25%
• The tariff rate on $120b of Chinese imports will be cut to 7.5% from 15%
• China will commit to purchase additional U.S agricultural products reportedly worth between $40–50 billion over a two–year period

President Trump announced that Phase Two discussions will begin immediately and will focus on his major issue – technology and intellectual property rights.

Interest Rates Remain As–Is

While Phase One dominated the news, the Federal Reserve and the European Central Bank both announced that they would both leave rates unchanged.

The Fed went a step further and suggested that there would be no rate hikes in 2020. Those remembering the Fed\’s “indications” from this time last year, however, will take their suggestions with a grain of salt.

Retail Sales Increase

On Friday, the U.S. Census Bureau reported estimates of U.S. retail and food services sales for November 2019. And while both saw increases, the increases were less than expected. From the Census Bureau:

• Advance estimates of U.S. retail and food services sales for November 2019, adjusted for seasonal variation and holiday and trading–day differences, but not for price changes, were $528.0 billion, an increase of 0.2% from the previous month, and 3.3% above November 2018
• Total sales for the September 2019 through November 2019 period were up 3.5% from the same period a year ago
• Retail trade sales were up 0.3% from October 2019, and 3.1% above last year
• Nonstore retailers were up 11.5% from November 2018, and food services and drinking places were up 5.1% from last year

Most Sectors Up on the Week

Looking at the performance of the 11 S&P 500 sectors, we saw that 9 of them ended the week green and the performance between the top sector and bottom sector was pretty big.

Information Technology led the way this week with a 2% jump and Real Estate led the losers with a decline of 2.5%. That’s a fairly large difference in just a week’s time.

Year-to-date through Friday, investors saw that all of the 11 sectors are green. But again, the range is pretty big.

• The Information Technology sector leads the way with a YTD gain of almost 44%
• The Energy sector brings up the rear with a YTD gain of only 4.07%

Sources

federalreserve.gov; census.org; standardandpoors.com; factset.com; nyse.com; msci.com; nasdaq.com; dowjones.com; morningstar.com; edwardjones.com; bloomberg.com