Closing Market Summary: Stocks Climb Ahead of G-20 Meeting Between Trump, XiThe S&P 500 finished strong with a gain of 0.8% on Friday to conclude one of its best weeks of the year. Investors turned their attention to the highly-anticipated G-20 Leaders Summit in Argentina, where U.S. President Trump and China President Xi are expected to take the main stage at a dinner meeting on Saturday.
The Dow Jones Industrial Average gained 0.8%, the Nasdaq Composite gained 0.8%, and the Russell 2000 gained 0.5%.
The major indices hovered near their flat lines in afternoon trading before a Reuters report indicated a Chinese official saying that there are points of consensus between the U.S. and China on trade. Though, some disagreements remain. With that in mind, there seems to be a consensus building around the idea that the best one can hope for is a mutual agreement to forestall further tariff actions for several months so that further talks can be conducted to address trade policy issues.
U.S. Trade Representative Lighthizer spurred some optimism Friday morning when he said he would be surprised if the dinner meeting was not a success. He added it is entirely up to the two Presidents if a deal will be made, though.
10 of the 11 S&P sectors finished in the green on Friday with the utilities (+1.5%), health care (+1.1%), and information technology (+1.1%) sectors outperforming the broader market.
Chip stocks also outperformed, evidenced by the Philadelphia Semiconductor Index rising 1.5%, to help lift the heavily-weighted information technology sector. NVIDIA (NVDA 163.43, +6.07, +3.9%) led chip stocks higher, though Apple (AAPL 178.58, -0.97, -0.5%) was unable to gain traction, eventually losing its status as the S&P 500's largest company by market cap to Microsoft (MSFT 110.89, +0.70, +0.6%).
Some positive earnings reports from tech companies HP (HPQ 23.00, +0.14, +0.6%), VMware (VMW 166.17, +4.69, +2.9%), and Workday (WDAY 164.00, +18.70, +12.9%) also contributed to the sector's advance. Workday and VMware beat both top and bottom line estimates, and HP beat revenue estimates. Workday also raised its fiscal 2019 subscription revenue outlook.
Transport stocks had a great day with the Dow Jones Transportation Average rising 1.3%. With oil and its derivatives factoring heavily in their cost of operations, transport issues reacted favorably to the decline in oil prices and were a leadership area in November. The average finished with a monthly gain of 6.2%.
On the other hand, the energy (-0.2%), materials (+0.4%), and communication services (+0.4%) sectors underperformed the broader market.
In other corporate news, General Electric (GE 7.50, -0.44) and Marriott (MAR 115.03, -6.81) lost 5.5% and 5.6%, respectively, amid some negative occurrences. A WSJ report indicated that General Electric ignored insurance risks, according to some former employees. Deutsche Bank also lowered its GE price target to $7. Separately, Marriott announced a data breach involving its guest reservation database for its Starwood-branded hotels.
Separately, the U.S. Treasury yield curve saw some flattening with the 2-yr yield adding one basis point to 2.81%, and the 10-yr yield losing three basis points to 3.01%. Also, the U.S. Dollar Index rose 0.4% to 97.20, and WTI crude lost 1.6% to $50.65/bbl, weighing on the oil-sensitive energy group.
Reviewing Friday's economic data, which only included the Chicago PMI for November:
- The MNI Chicago Business Barometer, popularly referred to as the Chicago PMI, surged to 66.4 in November (consensus 58.0) from 58.4 in October. The November reading is an 11-month high.
- The key takeaway from the report is that it was fuelled by a big uptick in the New Orders Index, which hit its highest level since May 2014. The strength in new orders is an encouraging sign of robust manufacturing demand for the Chicago Fed region.
Looking ahead, investors will receive the ISM Index for November and Construction Spending for October on Monday.
- Nasdaq Composite +6.2% YTD
- Dow Jones Industrial Average +3.3% YTD
- S&P 500 +3.2% YTD
- Russell 2000 -0.2% YTD
