Stocks began trading last week in a notable downtrend. Items accounting for the weakness included comments by President Trump that it might be “better to wait until after the election” for a China trade deal, proposed tariffs of up to 100% on $2.4 billion on various French imports, and some weaker-than-expected economic data.
The November ISM Manufacturing Index came in at 48.1, down from the previous month and below market expectations of 49.4 (readings below 50 indicate contraction). Additionally, the Commerce Department reported Construction Spending posted a .8 decline versus expectations for a .5 gain. The data improved by the end of the week however, as the Consumer Sentiment Index came in at 99.2 versus market estimates of 96.5. The economic number that defined the week though, was the November Jobs Report.
Stocks jumped higher last Friday after a “blowout” Jobs Report. The Department of Labor reported the U.S. economy added 266,000 jobs in November, easily surpassing expectation for gains of approximately 185,000. Additionally, the unemployment rate fell to 3.5%, its best level in 50 years, and average hourly earnings rose 3.1%, a notch better-than-expected. The overall strength of this report changed the mood of the market and convinced many investors the U.S. is not on the cusp of recession.
Often times, stock prices fall after good economic news on concerns the Federal Reserve will become less accommodative and/or raise interest rates. The market did not embrace that line of thinking (where good news is bad news), following the jobs data. The good news on the job front was treated as good news for the stock market! Stocks rose sharply on Friday, erasing the losses from earlier in the week, and propelling the Standard & Poor’s 500 Index to a (albeit slight) positive weekly close!
All the best – Southport Station Financial Management, LLC