Commentary

Supported by indications of progress on a U.S.-China trade agreement and strong U.S. economic reports (including new home sales and 2nd estimate Q3 GDP), the S&P 500 Index moved 1.4% higher through Wednesday to close at 3153.63, another all-time high. President Trump’s signing of legislation supporting Hong Kong protesters along with falling energy prices pushed U.S. stock markets slightly lower with the S&P 500 Index slipping 0.4%. At week’s end the S&P 500 was up 1% to 3140.98, 10-year U.S. Treasury rates gained 1bp to 1.78% and the U.S. dollar was unchanged (as measured by the DXY index).

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Comments by Chinese President Xi Jinping calling for increased communications between the U.S. and China, positive comments from President Trump regarding U.S.-China trade frictions and stronger-than-expected economic reports on Friday moved U.S. stock markets, 10-year U.S. Treasury rates and the U.S. dollar off their lows of the week. At week’s end the S&P 500 was down 0.3% to 3110.29, 10-year U.S. Treasury rates fell 6bps to 1.77% and the U.S. dollar strengthened (all on Friday) 0.3% (as measured by the DXY index). ).

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Renewed optimism over a U.S.-China trade agreement spurred by Trump administration comments and stronger-expected retail sales on Friday, pushed the S&P 500 Index almost a percent higher and moved 10-year U.S. Treasury rates a couple of basis points off their lows of the week. At week’s end the S&P 500 increased 0.9% to 3120.46, 10-year U.S. Treasury rates fell 11bps to 1.83% and the U.S. dollar weakened 0.4% (as measured by the DXY index).

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Stronger-than-expected U.S. economic and earnings reports – and despite increased expectations that the next rate move by the U.S. Federal Reserve bank will be a move higher – pushed the S&P 500 Index up 0.85% to an all-time high of 3093.08 while moving the 10-year U.S Treasury rate higher by 23 bps to 1.94% and strengthened the U.S. dollar by 1.2% (as measured by the DXY index).

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Starting the week with strong expectations of a partial trade agreement between the U.S.- and China, U.S. stock markets and the 10-year Treasury rate both moved higher early in the week. With Wednesday’s FOMC decision to once again lower the Fed Fund’s target rate 25bps while at the same time hinting the Federal Reserve Bank would pause further rate reductions combined with a lackluster 3rd quarter GDP report, 10-year U.S Treasury rates moved off their intraweek highs while the U.S. stock markets seemed unphased. Weaker-than-expected consumer spending number and reduced expectations of a U.S.-China trade agreement partially reversed gains in U.S. stock markets and pushed the 10-year Treasury even rate lower on Thursday. Friday’s much-stronger-than-expected employment situation report -despite weaker-than-expected manufacturing data -pushed U.S. stock markets even higher and slightly increased the 10-year U.S. Treasury rate. At week’s end the S&P 500 was up almost 1.5% to 3066.91, the 10-year U.S. Treasury was lower 8bps at 1.71% and the U.S. dollar (as measured by the DXY index) was weaker 0.6%.

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