Investment Commentary – February 20, 2019
Year to Date Market Indices as of Market Close February 20, 2019
Dow 25,893 (11.02%)
S&P 2,779 (10.88%)
NASDAQ 7,482 (12.71%)
Gold $1,348 (4.45%)
OIL $57.12 (23.74)
Barclay Bond Aggregate (1.24%)
Fed Funds Rate 2.50% (last increase was 12/19/18)
Stocks edge higher as investors watch trade talks, await Fed minutes
U.S. stocks rose modestly Wednesday, as investors kept an eye on U.S.-China trade talks in Washington and awaited minutes of the Federal Reserve’s January policy meeting later in the afternoon.
What are stock indexes doing?
The Dow Jones Industrial Average DJIA, -0.10% rose 15 points, or 0.1%, to 25,906, while the S&P 500 index SPX, -0.07% rose 2 points, or 0.1%, to 2782. The Nasdaq Composite Index COMP, -0.23% was up 20 points, or 0.3%, at 7,506.
What’s driving the market?
Trade remains in the spotlight despite few concrete developments. Stocks appeared to find some support Tuesday after President Donald Trump said there was nothing “magical” about a March 1 deadline for U.S.-China negotiations, which was taken as a sign that tariffs on imports of Chinese goods might not automatically be raised to 25% from 10% on that date if a formal deal hasn’t been completed.
U.S. and Chinese negotiators are set to continue talks in Washington after discussions last week in Beijing.
Minutes from the January meeting of the Fed’s rate-setting Federal Open Market Committee, to be released at 2 p.m. Eastern Time, will be parsed for further insights into the central bank’s abrupt decision to put future rate moves on hold.
At 3 p.m. Federal Reserve Vice Chairman Richard Clarida is scheduled to sit for an interview on CNN International, potentially giving investors another window into the FOMC’s thinking.
What are analysts saying?
Market expectations for more dovish signals from the Federal Reserve are high, Marc Pfeffer, chief investment strategist and portfolio manager at CLS Investments told MarketWatch. “The market is expecting the Fed to downgrade their view of the economy, while remaining positive about the economy,” he said.
The Fed minutes are “the single most important event of the week because it will give us much-needed insight into the Federal Reserve’s thinking around its significant change of heart,” said Kristina Hooper, chief global market strategist at Invesco, in a note.
“In particular, I am interested in seeing the discussion around balance sheet normalization, given that the Fed’s willingness to alter its plan was the single biggest development in the last FOMC announcement, in my opinion. This is especially so given recent reports that the Fed may end balance sheet normalization this year,” she said.
Around the web:
Back on track: The major stock indexes gained 2% to 3%, picking up momentum after finishing mostly flat the previous week. For the Dow, it was the eighth positive week in a row—a run that’s been driven by diminishing concerns over U.S. monetary policy and the U.S.-China trade conflict.
Shutdown averted: Congress managed to steer clear of another partial government shutdown when it approved a negotiated deal to keep the government funded through this fall. President Trump signed the bill on Friday—hours before funding was set to expire for parts of the government—while also declaring a national emergency over border security issues.
Fed minutes: Wednesday’s release of minutes from the U.S. Federal Reserve Board’s late January meeting will be closely watched, as the meeting notes are expected to reveal how broad the consensus was among board members to shift to a more dovish stance on monetary policy. The Fed’s adoption of a more neutral approach to interest rates this year helped spark the recent rally for stocks.
Other Notable Indices (YTD)
Russell 2000 (small caps) 16.91
EAFE International 8.24
Emerging Markets 6.79
Shiller Annuity Index 4.69
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.