Market Perspective for November 8, 2019

Equities climbed to new all-time highs on positive economic data and solid earnings news. The Dow Jones Industrial Average advanced 1.36 percent. The S&P 500 Index gained 0.90 percent and the Nasdaq 1.05 percent.

Rising interest rates boosted the financial sector. SPDR Financial (XLF) increased 2.54 percent. SPDR S&P Regional Bank (KRE) rallied 3.27 percent. Rising oil prices enabled SPDR Energy (XLE) to gain 2.28 percent. SPDR Industrial (XLI) rose 1.93 percent.

Economic data was solid. The ISM services index increased to 54.7 percent and beat expectations. The Job Openings and Labor Turnover Survey (JOLTS) still shows more job openings than unemployed Americans. Initial unemployment claims were 211,000.

The 10-year Treasury yield climbed to 1.93 percent this week, up from 1.7 percent. iShares Barclays 20+ Year Treasury (TLT) slumped 4.00 percent. Corporate and investment grade bonds also slid as interest rate risk chipped away at longer-duration bond valuations. Both high-yield and floating-rate funds gained on the week.

The U.S. Dollar Index was a beneficiary of rising rates. It increased 1.24 percent for the week. iShares MSCI Emerging Markets (EEM) increased 1.06 percent on increased optimism over a trade deal with China. MSCI EAFE (EFA) advanced 0.53 percent.

Crude oil closed the week at $57.24 per barrel. Natural gas extended its rally as cold weather swept across the northern part of the U.S., finishing the week at $2.79 per mmBTU. Natural gas was trading at $2 mmBTU in August.

Disney (SID) was one of the many companies beating earnings forecast this week. Shares advanced 3.91 percent.

Xerox (XRX) launched a bid for Hewlett-Packard (HPQ). Normally the acquirer’s shares drop on takeover news, but Xerox outperformed HP, rising 16.04 percent to the latter’s 9.79 percent. Xerox is only one-third the size of HP, and it’s offering $17 in cash plus shares to make for a $22 per share offer. HP said the offer undervalued the company and doesn’t think it will benefit shareholders. Analysts also considered it a low offer. Xerox’s move could spur further activity if cash-rich tech giants move to block a merger with better offers.

 

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