New Highs, Finally
U.S. stocks finally reached new highs in their fourth straight week of gains. On October 28, the S&P 500 Index notched its first record-high close since July after the European Union (E.U.) granted a three-month extension to the United Kingdom’s deadline to leave the E.U. (Brexit). On October 30, the S&P 500 posted a second record high after the Federal Reserve’s (Fed) third rate cut of the cycle. Investors rewarded Fed Chair Jerome Powell’s positive economic messaging and commitment to flexibility, even though he strongly hinted that policymakers may not cut rates again for a while.
Economic data was the primary focus for investors. The S&P 500 jumped to a third record high on November 1 after the October jobs report showed that U.S. companies are still hiring at an above-average pace for the expansion. Data showed gross domestic product rose a better-than-expected 1.9% in the third quarter, in line with recent trends, while manufacturing activity picked up from a multi-year low and consumer confidence fell slightly.
Global stocks continued to rally. The MSCI EAFE Index of developed-market equities and the MSCI Emerging Markets Index both rose through October 31, poised for their fourth straight weekly climb. The Euro Stoxx 50 reached 20-month highs in the week, and the Nikkei 225 Index of Japanese stocks notched a 12-month high.
Growth stocks generally outperformed value stocks during the week, and the Russell 2000 Index of small cap stocks led returns among indexes we track. Healthcare led sector returns, while real estate and energy stocks lagged.
Fixed Income, Currencies, And Commodities
U.S. fixed income climbed in tandem with stocks, fueled primarily by the Fed’s rate cut, with some additional support from pessimistic trade headlines. The 10-year U.S. Treasury yield fell after a strong rally over the previous three weeks. Diversified high-quality global and U.S. debt and U.S. investment-grade corporates paced fixed income gains, while high-yield and emerging market debt lagged.
The U.S. dollar slid during the week as currency markets priced in easier Fed policy. Copper prices fell as trade tensions increased, and gold prices rose. Oil prices declined amid oversupply concerns.
Next week, investors will get more details on the health of the services sector from the Institute for Supply Management and Markit on November 5. Nonfarm productivity and unit labor costs data is also slated to be released November 6. About 80 S&P 500 companies are also scheduled to report quarterly results as third-quarter earnings season winds down. The international economic calendar will deliver final October Markit global manufacturing data November 4, and Markit global services data November 6. The Bank of England also is scheduled to announce a policy decision November 7.
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