After a good October, equity markets took a big break last week as most world stock and commodity indexes fell a relatively large 3% to 5%. Reduced OECD forecasts for world growth in general and trade in particular started the week off on a bad note. Although other groups had already reduced their forecasts, worries about world trade, especially in developing markets, was not happy news. GDP growth in Europe for the third quarter was also a mild disappointment.
Poor reported earnings and/or forecasts in the U.S. retail sector (
Macy's M, JC Penney JCP, and others) and technology ( Cisco CSCO) certainly didn't help. Then, to end the week, the retail sales headline growth rate was a disappointment at just 0.1%, though it was not as bad as the market seemed to think. Stripping out the gas and auto sectors, which are calculated from other, more bullish data sets, month-to-month growth was a more acceptable 0.3%, and year-over-year retail data was still very close to trend. Beyond stock-market-related activities, interest rates and commodities were both lower for the week, suggesting market participants are reconsidering the strength of economic activity.
Some of the week's data cast doubt on October's strong U.S. employment report, which helped boost the market last week. However, this week's small-business sentiment report and the Bureau of Labor Statistics Job Openings report suggest that last week's labour market report was no fluke.
