Amid an uplifting start of the earnings season, a potential trade deal with China and new Brexit deal, the US stock market had a solid run in the first two weeks of October. The S&P 500 and the Dow Jones Industrial Average gained 1.96% and 1.70%, respectively, while the NASDAQ Composite appreciated by 3.14% through October 17.
However, there also have been some worrisome developments that put investors on alert. On the first day of the month, the September ISM manufacturing PMI showed a decline to 47.8% from 49.1% in August, also missing the consensus estimate of 50%. A PMI figure below 50% usually shows that the manufacturing sector is in recession. In addition, the September non-farm payroll figures released by the Department of Labor showed a growth of 136,000 jobs, lower than the previous month’s figure of 168,000 and below the consensus of 145,000. However, the unemployment rate inched lower to 3.5%.
Both ISM manufacturing PMI and nonfarm payroll concerned investors, with experts believing that the data could incentivize the Fed to cut interest rates later this month.
At the same time, US trade relations with the rest of the world took a couple of interesting turns. On the one hand, following negotiations, the US and China reached a phase one deal that reportedly covers agricultural purchases, intellectual property and financial services. However, the enforcement of the deal is still being worked out.
And while there was a breakthrough in trade between the US and China, on the other side of the world, things have gotten worse as President Trump imposed tariffs on $7.5 billion of imports from the EU in retaliation to the latter subsidizing Airbus.
In the meantime, the third-quarter earnings season kicked off and for the next several weeks investors will be focused on company performance, allowing trade and economic slowdown to move to the background.
Having said that, let’s take a closer look at the companies that were in the spotlight of Financial Advisors in the first half of October. TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, compiled a list of tickers, with Alibaba Group Holding Ltd – ADR (NYSE: BABA) on the first spot amid China-US trade making headlines. Other companies that made TrackStar’s list of the most searched tickers include Federal National Mortgage Association (OTC: FNMA), Nektar Therapeutics (NASDAQ: NKTR), and PagSeguro Digital Ltd (NYSE: PAGS).
Let’s now take a closer look at the stock that ranked as the second most-searched among Financial Advisors – Federal National Mortgage Association, or Fannie Mae. To those who don’t know, Fannie Mae is a Government-Sponsored Enterprise, whose goal is to make mortgages more affordable to low- and middle-income buyers.
Fannie Mae attracted the attention of Financial Advisors amid several developments. At the end of September, the US Treasury Department and Federal Housing Finance Agency announced a new set of rules that would allow Fannie to hold $25 billion of capital, up from $3.0 billion in reserves it was allowed until now.
Moreover, recently, the overseer of Fannie Mae and its brother organization Federal Home Loan Mortgage Corp (OTC: FMCC), or Freddie Mac, started looking for a company that would help with corporate and capital restructuring of the two GSEs.
Both developments, come amid the government’s plans to release both Fannie and Freddie from Federal Conservatorship, under which they were put back in 2008. Once the conservatorship constraints are removed, more investors will be able to profit from the two companies. However, the move can take years and will require a lot of political action.