Investment Commentary –November 22nd, 2016

Market Indices as of Market Close November 22nd, 2016

Dow 19,023 (8.28% YTD)
S&P 2,204 (6.51% YTD)
NASDAQ 5,386 (5.73% YTD)
Global DOW 2,457 (2,033 week low/high 2,489)
10-year Treasury 2.31 (1.32 52 week low /2.37 high)
Gold 1,212 ($1,053 52 week low /high $1,384)
Oil $47.90 ($34.55 52 week low /high $53.72)

Dow closes above 19,000 for first time as stocks notch record highs

Major U.S. stock indexes closed at record highs for a second straight session Tuesday, with the Dow industrials and the S&P 500 also clearing noteworthy psychological barriers.

U.S. stocks closed higher Tuesday as the Dow industrials and S&P 500 cleared psychological milestones but major indexes simultaneously reached record highs for a second straight day.

The Dow Jones Industrial Average DJIA, +0.35% rose 67.18 points, or 0.4%, to finish at 19,023.87, its first session of surpassing and closing above 19,000. The average was led higher by more than 2% gains in both Verizon Communications Inc. VZ, +2.44% and Home Depot Inc. HD, +2.15%

Meanwhile, the S&P 500 index SPX, +0.22% finished up 4.76 points, or 0.2%, at a record 2,202.94, with nine out of 11 sectors closing higher, led by gains in telecom and real-estate stocks. Additionally, consumer-discretionary names were among the biggest outperformers, lifted by retailers.

The Nasdaq Composite Index COMP, +0.33% gained 17.49 points, or 0.3%, to finish at a record 5,386.35.

As all three indexes hit new records, so did the Russell 2000 RUT, +0.92% index of small-cap stocks. The Tuesday session marked the first time that all four indexes hit intraday records consecutive days since April 1998. The last time all four closed at records for two sessions in a row was March 18 and 19, 1998.

The Russell index closed higher for the 13th straight session, the longest such streak for the index since a 15-day stretch ending in February 1996. The small-cap index rose 12.04 points, or 0.9%, to finish at 1,334.28 on Tuesday.


Trump sinks Asia trade pact, opening the way for China to lead

An ambitious Asia-Pacific trade pact linking the United States and 11 countries lay in tatters on Tuesday after U.S. President-elect Donald Trump said he would kill the deal on his first day in office on Jan. 20.

Trump’s statement appeared to open the way for China to assume the United States’ leadership mantle on trade and diplomacy in Asia. The Republican termed the Trans Pacific Partnership (TPP) “a potential disaster for our country.”

China, Japan and South Korea are already in the initial stages of discussing a trilateral trade deal, and Beijing has been pushing its own limited Asian regional trade pact that excludes Washington for the past five years.

Japan and Australia, Washington’s closest allies in Asia, pledged after Trump’s announcement to push ahead without the United States, although removing the largest market for goods and services would shrink it dramatically.

“Pushing them forward is the idea that, if they don’t act, it will look like China’s very weak trade deals are the only game in town,” said Derek Scissors, a resident scholar at the American Enterprise Institute, where he focuses on Asian economies and trade.

Trump has pledged to redraw trade deals to win back American jobs, and has threatened Mexico and China with punitive tariffs in a move that some economists have warned could spark a trade war that threatens to roll back decades of liberalization.

Ending the TPP was a key election pledge of Trump’s and was also the policy of his Democratic opponent, Hillary Clinton. The deal died in Congress after Trump’s Nov. 8 election victory.

The Trans Pacific Partnership, a signature diplomatic initiative of Democratic President Barack Obama, was intended to lower tariff barriers in countries that accounted for 40 percent of the world economy, as well as providing a bulwark against China.

A major trade deal between the United States and Europe is also now close to collapse after Britain’s plans to withdraw from the European Union prompted Washington to demand better terms and opposition in France and Germany has also all but scuppered it.


Black Friday Bounce Comes Early for Retail Stocks Hitting Record

Investors aren’t waiting around to celebrate Black Friday.

Three days before the busiest shopping day of the year, companies tracked by the Standard & Poor’s 1500 Retail Index surged 1.7 percent to an all-time high in data going back to 1995. Ross Stores Inc., Children’s Place Inc., Ollie’s Bargain Outlet Holdings Inc. and Shoe Carnival Inc. each added at least 1.5 percent on the way to record levels.

Shares are rallying amid better-than-expected earnings, including reports Tuesday from Chico’s FAS Inc., Dollar Tree Inc. and Barnes & Noble Inc. The National Retail Federation forecasts holiday sales will increase 3.6 percent this year, while Retail Metrics estimates November sales will rise 1.3 percent from October for the third monthly increase.

“The market’s done a better job in recent years in assessing holiday shopping,” said John Canally, chief economic strategist at LPL Financial in Boston, which oversees about $479 billion. Amid the backdrop of a rallying stock market since mid-September, a good back-to-school season, relatively low gasoline prices and higher wages, consumers may be ready to spend, he said.

“From a top-line perspective, the sales season looks pretty good,” Canally said, adding that LPL has a “cautious, wait-and-see” outlook for retail stocks. “It really comes down to company execution. Beyond that, it’s a margin story — how much does it cost to get the sales out.”

The index of retail stocks has risen 5.5 percent so far in November and is on pace for its best month of returns since July. November historically has been favorable seasonally, delivering average returns of 3.1 percent since 1995, second-best to March.


THIS DAY IN FINANCIAL HISTORY: Assassination Causes Panic

On this day in 1963 John F. Kennedy is assassinated in Dallas, Texas. The assassination of the American President causes Wall Street Traders to panic. The resulting sell off of stocks caused by the panic made the New York Stock Exchange drop $13 billion in just a few hours.

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.