Weekly Market Update – January 28, 2019

Last Week

  • Fed Officials May Be Eyeing Early End To Balance Sheet Runoff. The Federal Reserve’s newfound flexibility has led Fed leaders to discuss the possibility of holding a larger portfolio of Treasuries than previously expected when the original wind-down
    began two years prior.
  • Manufacturing Data Reflects Slowing Growth. Flash Purchasing Managers’ Index (PMI) readings outside of the U.S. fell below December’s readings in the first post of the year.  Japan and Germany saw the steepest declines to 50.0 and 49.9, while Europe reported a smaller decline to 50.5.
  • Central Banks Struggle to Hit Inflation Targets. The European Central Bank (ECB) continues its accommodative policy leaving its deposit rate at -0.4%. The €2.6 trillion quantitative easing program ended in December but the ECB will reinvest those maturing bonds a long while past the time that it starts raising rates.
  • Earnings Growth Tops Expectations. So far, 113 S&P 500 companies (23%) have reported earnings with aggregate earnings growth of 13.0% and revenue growth of 5.4%.

This week

  • Verizon, Facebook and General Electric to Report Earnings. General Electric (GE), 3M (MMM), Caterpillar (CAT), Boeing (BA) and United Parcel Service (UPS) release earnings out of the industrials sector while Pfizer (PFE) and Merck (MRK) post for health care. Other notable companies this week include Apple (AAPL), McDonald’s (MCD), Microsoft (MSFT), Amazon (AMZN), Chevron (CVX) and Exxon Mobil (XOM).
  • No Rate Hike Expected in First Fed Meeting of 2019. In a busy week in Washington that includes the next round of trade talks with China, the Federal Reserve will hold their first meeting of the year.
  • Friday’s Job Report is Expected to Add 165,000 Jobs. The unemployment rate and wage inflation are expected to remain unchanged at 3.9% and 3.2% y/y, respectively.

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