Market Watch – November 30, 2018
Dovish Fed Remarks Help Spark Equity Rally
The Dow climbed more than 600 points Wednesday, erasing its November losses, after Fed Chair Jerome Powell’s remarks quelled investor fears over the prospect of aggressive interest rate hikes. Led by the tech and health-care sectors, stocks climbed almost immediately after Powell’s comments. The Dow added 618 points, the Nasdaq surged 209 points, while the S&P rose 62 points. Wednesday’s rally marked the first time since November 1 that the benchmarks climbed in three consecutive sessions. Powell’s apparently dovish tone helped the TSX as well, which surged 227 points on Wednesday, and the loonie, which rallied against its U.S. counterpart, rebounding from an earlier five-month low. Gains for the loonie came despite a 13-month low for the price of oil.
In trading Thursday, oil recovered from earlier losses to move above $50 a barrel, after reports that Russia and OPEC are likely to cut production. That’s welcome news for Canada, as plummeting oil prices (including Canadian heavy crude) have weighed on the economy, reducing expectations for a January rate hike by the Bank of Canada. In the U.S., new home sales slid sharply to a 31-month low in October as higher mortgage rates and rising construction costs created major headwinds for home builders. The 8.9% decline marked the fifth month of declines this year and was the steepest since December 2017.
Meanwhile, Commerce Department figures released Wednesday show that overseas profit growth at U.S. companies is slowing – a new sign of how the waning global economy is finally being felt in the U.S. In the third quarter, U.S. profits overseas rose 7% from a year earlier, a drop from 13.7% in Q2 and Q1’s 15.6%. Finally, all eyes will be on this weekend’s G20 Summit in Buenos Aires to see if the U.S. and China can make any progress in their ongoing trade war. Earlier in the week, President Trump threatened to move ahead with additional tariffs on Chinese goods.