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Further June Gains – Weekly Update for June 17, 2019

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The Week on Wall Street

Stocks advanced for a second straight week. The S&P 500 benchmark rose 0.47%; the Nasdaq Composite, 0.70%; the Dow Jones Industrial Average, 0.41%. Overseas shares, as tracked by the MSCI EAFE developed markets index, added 0.20%.

The market seemed to put its recent preoccupation with trade issues aside, with attention shifting to this week’s Federal Reserve monetary policy meeting. Traders in futures markets now believe the Fed will make a rate cut in July, so its June policy statement will be of great interest.

Oil Prices Rollercoaster

Attacks on vessels in the Strait of Hormuz, the busy oil shipping channel, helped to push the price of West Texas Intermediate crude 2.2% higher Thursday, just a day after a 4% fall. Even so, WTI crude lost 2.7% in five days, closing Friday at $52.51 on the New York Mercantile Exchange.

Investors wondered at mid-week if tensions in the Persian Gulf region would soon impact oil output and transport. Looking beyond the short term, however, the International Energy Agency reduced its 2020 projection for global oil demand.

Households Bought More in May

Retail sales rose 0.5% last month, according to the Department of Commerce. Across the year ending in May, they advanced 3.2%. The previously announced 0.2% April retreat was revised into a 0.3% gain.

These numbers affirm strong household spending this spring. Consumer spending accounts for roughly two-thirds of the nation’s gross domestic product.

What’s Ahead

In terms of news, Wednesday offers what may prove to be the biggest economic event of the week: a Federal Reserve policy statement and press conference.

THE WEEK AHEAD: KEY ECONOMIC DATA

Wednesday: The Federal Reserve concludes a 2-day policy meeting, with Fed chair Jerome Powell addressing the media afterward.

Friday: The National Association of Realtors releases data on May existing home sales.

 

 

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: Jabil (JBL)

Wednesday: Kraft Heinz (KHC), Oracle (ORCL)

Thursday: Kroger (KR), Red Hat (RHT), Darden Restaurants (DRI)

Friday: CarMax (KMX)

 

Big Gains for the Major Indices – Weekly Update for June 10, 2019

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The Week on Wall Street

Stocks rallied during a week in which Wall Street was buffeted by headlines. The S&P 500 rose 4.41%. The Nasdaq Composite and Dow Jones Industrial Average respectively added 3.88% and 4.71%. The MSCI EAFE index of overseas stocks improved 2.02% across five days.

Following a mixed Monday, the market jumped Tuesday after dovish remarks from Federal Reserve Chairman Jerome Powell. Breaking out of a 6-week losing streak, the Dow had its best week since November.

Jerome Powell’s Comments

Speaking at the Federal Reserve Bank of Chicago, the Fed chair stated that central bank officials “will act as appropriate to sustain the expansion” of the economy in the face of “recent developments involving trade negotiations and other matters.”

The next 2-day Fed policy meeting ends on June 19, with a press conference to follow.

Hiring Cools

Employers added just 75,000 net new jobs to their payrolls in May, according to the Department of Labor. Economists polled by Reuters thought that the gain would be 185,000. The main unemployment rate held at 3.6% last month; the U-6 rate, which includes the underemployed and those who have stopped looking for work, fell 0.2% to 7.1%.

To some analysts, the weak May hiring number hinted at private-sector concern over tariffs. To others, it simply signified the possibility that the economy may be at or near full employment.

Final Thought

While breaking news does often merit investor attention, refrain from letting the headlines of the moment prompt you into emotional decisions. Brace yourself for further headlines that may drive market volatility because new developments are arriving quickly in the financial markets.

THE WEEK AHEAD: KEY ECONOMIC DATA

Wednesday: The latest Consumer Price Index, showing the rate of inflation in May and across the past 12 months.

Friday: The Census Bureau’s May retail sales report as well as the University of Michigan’s initial June consumer sentiment index, measuring consumer confidence levels.

 

 

 

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: H&R Block (HRB)

Wednesday: Lululemon Athletica (LULU)

Thursday: Broadcom (AVGO)

 

 

May Ends with a Retreat – Weekly Update for June 3, 2019

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The Week on Wall Street

Stocks struggled during a 4-day market week as the U.S.-China trade standoff continued to weigh on the minds of market participants. From the Friday, May 24 close to the Friday, May 31 close, the S&P 500 retreated 2.62%; the Nasdaq Composite, 2.41%; the Dow Jones Industrial Average, 3.01%. The MSCI EAFE index of overseas stocks dipped just 1.47% in a week.

Trade is dominating the conversation in the financial markets, with developments steadily unfolding. Wednesday, China’s state media suggested that the country could soon cut off exports of rare earths to the U.S. Late Thursday, the Trump administration announced 5% tariffs on all imports from Mexico, effective June 10; these taxes could rise in the coming months.

Meanwhile, on Main Street…

The Conference Board’s consumer confidence index soared to 134.1 in May, its highest reading since November; the consumer view of present economic conditions was the best since the end of 2000. Additionally, the University of Michigan’s consumer sentiment index ended May at 100.00, near the 15-year peak of 102.4 seen earlier in the month.

Spring also brought a solid advance in consumer spending. April’s gain was 0.3%, according to the Bureau of Economic Analysis.

Final Thought

While Wall Street remains cautious and concerned about trade, consumers appear to be upbeat, sensing widespread economic prosperity. This underscores the fact that the state of the economy does not necessarily correspond to the state of the stock market (and vice versa).

THE WEEK AHEAD: KEY ECONOMIC DATA

Monday: The Institute for Supply Management releases its latest factory purchasing manager index, which takes the pulse of the U.S. manufacturing sector.

Tuesday: Federal Reserve Chairman Jerome Powell speaks on monetary policy at the Federal Reserve Bank of Chicago.

Wednesday: Payroll giant ADP releases its May private-sector employment snapshot.

Friday: The Department of Labor presents its May employment report.

 

 

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: Cracker Barrel Old Country Store (CBRL), Salesforce (CRM)

Thursday: Beyond Meat (BYND), J.M. Smucker (SJM)

 

 

 

Trade News Moves the Market – Weekly Update for May 20, 2019

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The Week on Wall Street

Stocks fell sharply at the start of last week over trade tensions, then recovered with help from strong earnings and indications that U.S.-China trade talks would continue. Even so, the major indices had a down week. The S&P 500 lost 0.76%, while the Nasdaq Composite fell 1.27%, and the Dow Jones Industrial Average declined 0.69%.

In contrast, the MSCI EAFE benchmark for international stocks rose 0.19%.

The Latest Trade Developments

A broad selloff occurred Monday after China announced it would respond to increased U.S. tariffs by boosting its own import taxes on $60 billion of U.S. products. Friday morning, the Street breathed a sigh of relief as the Trump administration decided to delay 25% tariffs planned for imported cars and car parts; they had been slated to take effect on May 18. Just hours later, President Trump announced an end to U.S. tariffs on metals coming from Canada and Mexico.

At midweek, Secretary of the Treasury Steven Mnuchin told reporters that he expected the U.S. to resume trade negotiations with China in “the near future.”

Earnings Season Winds Down

The first-quarter earnings scorecard is nearly complete, as more than 90% of S&P 500 companies have reported actual Q1 results.

Stock market analytics firm FactSet notes that 76% of these firms have beaten consensus earnings-per-share estimates. Overall earnings for S&P 500 components have surpassed expectations by 5.4%. Both these percentages are above 5-year averages.

Final Thought

The market is quite sensitive to trade developments at the moment, and it is unclear whether this will be a short-term trend or a long-term influence on prices. While the U.S. prepares its next moves, China also is preparing its response to any new U.S. tariffs, which could include manipulating its currency.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: The April existing home sales report from the National Association of Realtors.

Wednesday: Minutes from the Federal Reserve’s May policy meeting.

Thursday: April new home sales figures from the Census Bureau.

 

 

 

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: AutoZone (AZO), Home Depot (HD), Kohl’s (KSS), Nordstrom (JWN)

Wednesday: Analog Devices (ADI), Lowe’s (LOW), Target (TGT)

Thursday: Best Buy (BBY), Intuit (INTU), TD Bank (TD)

Friday: Foot Locker (FL)

 

 

 

Higher Tariffs Take Effect – Weekly Update for May 13, 2019

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The Week on Wall Street

As we noted recently, Wall Street has a wandering eye. Last week, it focused on the new tariff threats in the ongoing U.S.-China trade dispute. Stocks fell across five trading sessions: the Dow Jones Industrial Average lost 2.12%, the S&P 500, 2.18%; the Nasdaq Composite, 3.03%. International stocks also fell: the MSCI EAFE index declined 3.06%.

Earnings and big-name initial public offerings mattered little last week. Traders were more concerned about how consumers and corporations might be affected by higher import taxes in future quarters.

Tariffs Increase

At 12:01 a.m. Friday, duties on $200 billion worth of Chinese products coming to the U.S. rose from 10% to 25%. Just days earlier, President Trump had tweeted that the U.S. might also tax another $325 billion of Chinese imports, mainly consumer goods.

While the proposed new taxes might take months to implement, institutional investors reacted negatively to this information, perceiving that trade talks were stalled.

Final Thought

A few weeks ago, market watchers noted the huge number of initial public offerings anticipated for 2019. One well-known tech firm completed its IPO on Friday, and the wave of tech IPOs is still building. According to research firm CB Insights, the average stock market valuation of the venture-capital-backed tech companies going public this year is $9.6 billion.

THE WEEK AHEAD: KEY ECONOMIC DATA

Wednesday: April retail sales figures from the Census Bureau.

Friday: The University of Michigan’s preliminary May consumer sentiment index, a measure of consumer confidence.

 

 

 

 

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Take-Two Interactive (TTWO)

Tuesday: Agilent (A), Ralph Lauren (RL)

Wednesday: Alibaba (BABA), Cisco (CSCO), Macy’s (M)

Thursday: Applied Materials (AMAT), Nvidia (NVDA), Walmart (WMT)

Friday: Deere & Co. (DE)

 

 

 

 

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