U.S. stocks plunged lower on the week as concerns of a trade war with China and underwhelming economic data raised concerns on future growth.  Consequently, interest rates also saw a significant decrease with the 10-year treasury yield dropping 16 basis points to 2.85%.  The spread between the 10-year treasury yield and the 2-year treasury yield dropped by 11 basis points to a very narrow 0.11%.  A disappointing jobs report had the U.S. dollar index drop from 97.20 to 96.63 and the price of gold rise 2.10% to $1,253.60 an ounce.  The price of crude oil also rose, increasing 3.15% to $52.32 a barrel as OPEC stated they would cut output by 800,000 barrels a day.

 

Index Started Week Ended Week Change Change % YTD %
DJIA 25,538.46 24,388.95 -1,149.51 -4.50% -1.34%
Nasdaq 7,330.54 6,969.25 -361.29 -4.93% 0.95%
S&P 500 2,760.17 2,633.08 -127.09 -4.60% -1.52%
Russell 2000 1,533.27 1,448.09 -85.18 -5.56% -5.69%

 

THIS WEEK’S ECONOMIC HIGHLIGHTS

 

  • The ISM manufacturing index increased from 57.2 in October to a very strong 59.3 in November.  Headlining growth in the index was new orders, which rose 4.7 points to 62.1.  Any read above 50 indicates improving manufacturing conditions.

 

  • The U.S. trade deficit in goods and services widened by a sizable 1.7% to $55.5 billion for the month of October.  Exports dropped by 0.1% to $211 billion, while imports increased by 0.2% to $266 billion.  Further yet, the U.S. trade deficit with China widened to $43.1 billion, 23% larger than it was a year ago.

 

  • Initial unemployment claims decreased by a slight 4,000 to 231,000 for the week ending December 1st.  However, its 4-week average continues to climb, reaching 228,000 which is up a substantial 15,000 higher than it was a month ago.  Meanwhile continuing unemployment claims dropped by a favorable 74,000 to 1.63 million.

 

  • The number of jobs grew less than expected in November, with nonfarm payrolls increasing only 155,000 as compared to 190,000 consensus.  Yet the unemployment rate remains near all-time lows at 3.7% as the labor participation rate remained unchanged at 62.9%.  Wage growth also came in slightly below expectations at 0.2% for the month and 3.1% year-over-year.

 

RECOMMENDED READING

This week’s recommended reading talks on how the U.S. economic data is indicating that recession risk is low, but the treasury market is indicating otherwise.  Please click HERE to read the article.

 

QUOTE OF THE WEEK

“Dependence on reversion to the mean for forecasting the future tends to be perilous when the mean itself is in flux.”

– Peter Bernstein

 

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