The S&P 500 recorded a 1.0% decline this week, which was brought down by a swell in bond yields, which increased to many-year highs in front of Friday’s news of the Employment Situation report for September. The tech-heavy Nasdaq and the small-cap Russell 2000 also performed below expectations, dropping 3.2% and 3.7%, respectively, however, the blue-chip Dow ended flat.
The week started on a positive record for the stocks, which was increased by the collaboration of Canada with Mexico and the United States in a trade contract. Canada signed a contract on Sunday night to permit greater dairy market entree to the U.S., as it also covers its automobile exports to the States. The agreement which is referred to as the United States-Mexico-Canada Agreement (USMCA) substitutes the 24-year-old NAFTA deal between the nations. Though, the deal still has to be approved by Congress, which will probably be hard.


 On Tuesday, Investors woke up to continue the Italian drama, as Italy’s anti-establishment government safeguarded its intention to boost the budget-deficit target of the country notwithstanding the pressure from the EU. Furthermore, the leader of the economic policy of the ruling Lega party, Claudio Borghi, proposed that if the country had its own currency then almost all of Italy’s problems could be solved, however, the notion was laid off by Italy Deputy Prime Minister, Di Maio.
Although Italy’s government concluded on Wednesday to concede to some of the EU’s budget request, the budget-deficit goal of Italy will be abridged from 2.4% of GDP in 2019 to 2.2% in 2020 and then to 2.0% in 2021.
That news has aided increasing bond yields higher instantly. Those gains were then increased significantly due to the yields following the September ADP Employment Change report which is an introduction to Friday’s nonfarm staffs reading which revealed approximately 230K positions that were included in the private sector payrolls which are significantly higher than the consensus evaluation of 184K. Also, The ISM Services Index for September recorded better yield than was expected on Wednesday, marking a record high of 61.6% ( consensus 58.2%), obviously showing that the service-providing sector of the economy is witnessing strong business activities.
There had been a continued increase in incomes and services on Thursday and then again on Friday after the Employment Situation report for September was released. A smaller-than-expected yield in nonfarm payrolls (134K actual vs 184K consensus) was shown in the report, however, there was a notable upward revision (to 270K from 201K) for the August increase. Other reports noted average hourly earnings surged 0.3% ( consensus +0.3%), 34.5 ( consensus 34.5) was reported as the average workweek earnings, and the rate of unemployment declined to 3.7% from 3.9%.
The major information obtained from the September jobs report is that the labor market is stable and still boiling with the view of pent-up wage pressures being released at any moment as employers face challenges in finding workers that are up to tasks.
This week’s S&P sector standings show most groups ended in the undesirable territory. The retreat was led by the consumer discretionary sector with a loss of 4.2%, and information technology (-2.0%) and communication services (-2.0%) also witnessed relative weakness. Looking at the positive side, there was increased in the influential financial sector by 1.7%, gaining from the increased yields and, more precisely, a steepening of the yield curve. The target 10-yr yield increased 16 basis points in whole, ending Friday at 3.23% which demonstrated its highest level since 2011, whereas the 2-yr yield increased five basis points to 2.88%.
In business news, the CEO John Flannery was replaced with the former Danaher CEO Larry Culp by the General Electric (GE); Elon Musk, Tesla’s (TSLA) CEO,  has decided to resolve charges with the SEC, whereby $20 million will be paid by Mr. Musk and Tesla each, and Mr. Musk has to vacate as chairman for three years; Amazon (AMZN) publicly declared its minimum wage will be increased to $15 an hour for all U.S. employees, compelling other retailers to follow suit; also General Motors (GM) declared that it will be collaborating with Honda Motor (HMC) to develop self-sufficient vehicles.

Categories: Stocks

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