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Wall Street to Your Street

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Oct 2019 Mkt Recap: Stocks Higher; Oil, Interest Rates and Retail Sales Stall

The stock market moved up modestly in October, but Treasury yields barely budged, due in part to a rate cut by the Federal Reserve (Fed).

The economy showed some signs of weakness, as retail sales declined, job growth dipped below recent averages, and gross domestic product (GDP) experienced only moderate growth.

Here are some recent economic highlights, some of which are covered in greater detail later in this report (Exhibit 1):

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  • Fed rate cut. The Fed cut rates by 0.25% on October 30 for the third time this year to attempt to boost the sagging economy. In all, the rate has been cut 0.75% this year, reducing the target range to 1.50% to 1.75%. The Fed board indicated that there would probably be no further rate cuts in 2019.
  • GDP growth modest. GDP growth for the third quarter was a lackluster 1.9%, according to the Department of Commerce on October 30. That followed a 2.0% growth rate in the second quarter. GDP growth had averaged about 2.7% the previous eight quarters.
  • Retail sales decline.Retail sales dipped 0.3% in August from the previous month, according to the Department of Commerce.
  • Oil prices barely budge. Oil prices continued to remain stagnant, with little movement during October.

Drilling down

U.S. stocks move up

The S&P 500® rose 2.04% for the month, from 2,976.74 at the end of September to 3,037.56 at the October close (Exhibit 2). (The S&P 500 is a market-cap-weighted index that represents the average performance of a group of 500 large capitalization stocks.)

The total return of the S&P 500 (including dividends) was 2.17% in October and 23.16% through the first 10 months of 2019.

The NASDAQ Index had a solid gain of 3.66% in October, from 7,999.34 at the September close to 8,292.36 at the end of October. For the year, the NASDAQ is up 24.9%. (The NASDAQ – National Association of Securities Dealers Automated Quotations – is an electronic stock exchange with more than 3,300 company listings.)

Retail sales sag

Total retail sales for September were down 0.3% from the previous month, but were still up 4.1% versus a year earlier, according to the Department of Commerce report on October 16. Non-store retailers (primarily online) declined by 0.3% for the month but were still up 12.9% from a year earlier.

Employment growth still slow

U.S. employers added 138,000 new jobs in August, according to the U.S. Bureau of Labor Statistics Employment Situation Report issued November 1. The unemployment rate remained near a 50-year low at 3.6%.

After a $0.01 drop in wages in September, average hourly earnings increased by $0.06 in October to $28.18. Over the past 12 months, wages have increased 3.0%.

Sector returns mixed

The S&P 500 Health Care sector, which had been lagging most other sectors this year, reversed course in October and led all sectors with a gain of 5.12%. In all, seven of the 11 sectors had gains. Information Technology was up 3.89% and Communications Services moved up 3.02%.

Among the four sectors that declined in October, Energy had the biggest loss. It was down 2.29%, as oil prices remained stagnant.

Exhibit 3 shows the results of the 11 sectors for the past month and all of 2019.

Treasury yields nearly unchanged

The yield on 10-year U.S. Treasuries was virtually unchanged in October, moving from 1.68% at the end of September to 1.69% at the October close (Exhibit 4).

Oil prices barely move

Oil prices have had little movement over the past month. The price of a barrel of West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, closed October at $54.18, just $0.07 higher than the September close of $54.07 (Exhibit 5).

The low prices are largely due to a decrease in demand caused by a slowing global economy.

International equities bounce back

The MSCI EAFE Index, which tracks developed-economy stocks in Europe, Asia and Australia, had a solid gain of 3.50% in October (Exhibit 6). It is up 13.70% for the year.

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