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January 7, 2019 — Investors welcomed in the New Year with a shortened, albeit event-filled first week. Equities closed the week positive, as the S&P 500 Index was up 1.90%, while U.S. Treasury yields fell across the curve.
Weaker-than-expected December ISM Manufacturing Index numbers raised questions about the strength of the United States economy. However, the December employment report was very strong as nonfarm payrolls rose 312,000 in the month, far surpassing the consensus expectation of 184,000. Including revisions to October and November, nonfarm payrolls increased 370,000. The strong jobs data alleviated some concerns of a slowing economy. At the same time in Atlanta, Federal Reserve Chairman Jerome Powell softened his tone by saying policymakers “wouldn’t hesitate to make a change” if needed and that the Federal Reserve is listening to the concerns of the market. Treasury yields surged on the news, with the 10-year Treasury note yield recording its biggest single-day gain since November of 2016. These comments, combined with the FOMC expectations of only two rate raises this year, down from three, were cheered by the equity markets as well.
In stock news, Bristol-Myers Squibb agreed to acquire Celgene Corporation for $74 billion in a stock and cash deal. The combined company, with a market cap over $150 billion, would be the fourth largest pharma company behind Johnson & Johnson, Pfizer, and Merck & Co.
Despite the bearishness that has befallen equity markets, if job and corporate profit data remain strong, as well as GDP growth and consumer spending, this might point to a rebound in equities and provide a firmer growth catalyst going forward.
Sources: briefing.com, Yahoo Finance, Kitco.com, U.S. EIA, First Trust, Wintrust Wealth Management analysis. Returns are total returns calculated through 1/4/2019 and 5 year returns are annualized. Gold is the New York spot price in $/oz. Oil is the Cushing, OK WTI spot price FOB in $/BBL. Securities, insurance products, financial planning, and investment management services are offered through Wintrust Investments, LLC (Member FINRA/SIPC), founded in 1931. Trust and asset management services offered by The Chicago Trust Company, N.A. and Great Lakes Advisors, LLC, respectively. ©2019 Wintrust Wealth Management
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