Last Week
The old Wall Street saying goes “the market takes the stairway up and the elevator down”. Unfortunately, we had a quick elevator down from the penthouse on Friday, triggered by renewed trade war concerns. Despite the government shutdown, the market reached another record close on Wednesday before a modest retreat on Thursday. The next morning, investors woke up to learn that President Donald Trump threatened to impose an additional 100% tariff on products from China. In response, share prices took a ride down a few floors, posting their worst day since early April’s “Liberation Day” announcements. That decline left the S&P 500 -2.4% for the week, the Nasdaq Composite -2.5%, and the Russell 2000 -3.3%. Declining issues outnumbered advancing issues by a factor of 4-1, with only the Utility sector escaping the carnage. The money flowed into the bond and metals markets. The yield on the 10-year Treasury dropped 7 basis points to 4.05%, while spot gold surpassed $4,000/oz level and spot silver reached $50/oz for the first time.
Due to the government shutdown, economic data was limited to private sector reports. University of Michigan consumer sentiment moved sideways for the month at a very depressed level. Overall, inflated prices and weakening job prospects are still at the forefront of consumers’ minds.
On the Chicago Sports Scene, the Cubs lost in the NL playoffs to the Milwaukee Brewers in a hard-fought series. The Bears play on Monday night versus the Washington Commanders. Note to the defense: wait for the game to be over before celebrating.
This Week
Earnings season gets underway with 37 S&P 500 companies reporting quarterly results, 65% of which are in the Financial sector. Consensus estimates suggest another quarter of strong results.
The fixed-income markets are closed on Monday in observance of a holiday, either Columbus Day or Indigenous Peoples Day, depending on where you live.
The Chinese response to Trump’s most recent tariff threat might be the most important variable for the markets. Trump set November 1 as the new deadline, giving a few weeks for negotiations. The futures markets rallied Monday morning after Trump signaled a willingness to negotiate with Beijing over trade issues.
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