U.S. stocks eked out a small weekly gain, based on the S&P 500 Index, thanks to Friday’s rally on the November jobs report. The rise marked the eighth weekly gain for the broad stock market index in the past nine weeks, which closed slightly below the previous record high set November 27. Concerns that a “phase one” trade deal between the United States and China might be delayed well into 2020 hurt stocks Monday and Tuesday, before reports suggesting further progress was being made helped drive gains on Wednesday and Thursday.
Economic data was mixed overall this week. The November jobs report revealed that more jobs were added in November than expected; payrolls for September and October were also revised upwards. Wages grew 3.1% year over year, a healthy clip we think can buoy personal incomes without raising concerns of overheating. Manufacturing and services data from the Institute for Supply Management fell short of expectations, though services—a larger component of the U.S. economy based on gross domestic product (GDP)—remained solidly in expansionary territory.
Global stocks were mixed for the week through Thursday. The MSCI EAFE Index of developed market stocks fell slightly on weakness in France and the United Kingdom. Trade headlines lifted Chinese stocks, driving a modest gain for the MSCI Emerging Markets Index.
The Russell 2000 Index of small cap stocks led U.S. index returns for the second straight week, evidence of broad market participation and cyclical investor positioning. The value style of investing outperformed growth, which was weighed down by technology and consumer discretionary losses.
Turning to fixed income, long-term yields bounced back amid optimism that a U.S.-China agreement may be getting close and better-than-expected November jobs data. The 10-year U.S. Treasury yield rose for a second straight week, reaching a three-week high on Friday. The Bloomberg Barclays U.S. Aggregate Index was virtually unchanged on the week through Thursday. U.S. Treasury Inflation-Protected Securities (TIPS) and high-yield corporate bonds led returns among bond sectors, while international sovereign debt lagged.
U.S. dollar weakness helped to drive broad-based strength in commodity prices. The price of oil reached its highest level since the September attacks on Saudi Arabia’s oil facilities, while copper prices spiked late in the week to post a more than 3% gain for the week. Gold prices ended the week lower as improved market sentiment reduced demand for perceived “safe-haven” investments, offsetting the positive impact of a weaker U.S. dollar that has tended to provide support for gold prices.
Next week the U.S. economic calendar will bring data on small business confidence and productivity on Tuesday, the Federal Reserve’s policy announcement on Wednesday, and consumer and producer inflation on Wednesday and Thursday. Friday we’ll get retail sales data that will include the start of the important holiday shopping season. Early indications showed the season got off to a strong start, particularly for online shoppers.
Internationally, investors will be watching for Japanese GDP, German trade data, and China inflation data on Monday. The U.K. general election and the European Central Bank meeting are being held on Thursday, when investors will also get a look at Eurozone industrial production.
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