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Dow, S&P, Nasdaq Climb Higher – Weekly Update for February 19, 2019

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The Week on Wall Street

Stocks ended a good week on a high note, as hints of progress in U.S.-China trade talks encouraged investors.

When the closing bell rang Friday, the S&P 500 settled at 2,775.60, after rising 2.50% in five days. The Dow Industrials gained 3.09%, to close Friday at 25,883.25. The Nasdaq Composite improved 2.39% to 7,472.41.

Shutdown Averted

Wall Street breathed a sigh of relief late last week as Congress passed a bill to keep the federal government funded. President Trump signed the measure on Friday.

The development is expected to have a positive effect on consumer sentiment, which may influence the financial markets. During the shutdown, consumer confidence hit an 18-month low.

Retail Sales Unexpectedly Slip

Thursday, the Census Bureau announced that retail sales fell 1.2% in December. This was the largest monthly decline in more than nine years and fell short of expectations. Economists polled by Bloomberg anticipated a small gain.

Was the slow December mostly a reflection of consumer anxieties about the shutdown and the stock market? If so, it is possible that retail spending may see an uptick. (It should be noted that these monthly numbers are often revised later.)

Inflation Holds Steady

The Consumer Price Index (CPI), the most widely followed measure of inflation, was flat in January for a third consecutive month. Year-over-year, overall inflation is running at just 1.6%.

The CPI is one of the key factors the Fed considers when assessing the economy and determining what lies ahead for interest rates.

What’s Ahead

U.S. and Chinese negotiators face a March 1 deadline to reach a deal to extend the current tariff truce. In March, tariffs on many Chinese imports could rise to 25% from 10%. President Trump said Friday that he is open to postponing the March deadline if it appears an agreement may be near.

THE WEEK AHEAD: KEY ECONOMIC DATA

Monday: Presidents’ Day holiday (U.S. financial markets closed).

Wednesday: Minutes of the January Federal Reserve policy meeting are released.

Thursday: January existing home sales.

Friday: Federal Reserve Vice Chairman Richard Clarida speaks in New York.

Source: Econoday / MarketWatch Calendar, February 15, 2019

The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision. The release of data may be delayed without notice for a variety of reasons, including the shutdown of the government agency or change at the private institution that handles the material.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: Devon Energy (DVN), Walmart (WMT)

Wednesday: Analog Devices (ADI), CVS Health (CVS)

Thursday: Dominos (DPZ), Fluor (FLR), Intuit (INTU), Kraft Heinz (KHZ)

Source: Morningstar.com, February 15, 2019

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

 

Markets Gain Again – Weekly Update for February 4, 2019

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Last week closed out one of stocks’ top January performances in years. In fact, both the S&P 500 and Dow posted their best January results in at least 3 decades. For the week, major domestic indexes were also up. The S&P 500 gained 1.57%, the Dow added 1.32%, and the NASDAQ increased 1.38%. The Dow’s performance marked its 6th week of gains in a row. Internationally, MSCI EAFE stocks also posted growth, rising 0.91%.

What drove stock results last week?

As discussed in our previous market update, last week provided a number of details for investors to focus on. Here are some key items that contributed to market performance:

  1. Federal Reserve Meeting: The Fed chose not to increase interest rates above its current 2.25% – 2.50% target. When releasing this update, the central bank noted that it would be “patient” when deciding about any future increases.

Market Impact?

The Fed’s signal that additional rate hikes may not be imminent helped improve market confidence.

  1. Corporate Earnings: By Friday, nearly half of S&P 500 companies had released earnings data for the 4th quarter of 2018. Of them, 70% had higher earnings-per-share than expected and 62% beat revenue projections. Right now, the S&P 500 is poised to have its 5th quarter in a row of double-digit earnings growth. However, the currently projected growth of 12.4% is lower than it has been since 2017.

Market Impact?

With worries of disappointing results calmed, some investors are feeling relieved by earnings season so far.

  1. January Labor Report: The latest Employment Situation release from the Bureau of Labor Statistics showed that the economy added 304,000 new jobs in January. At the same time, the unemployment rate increased slightly, as the count included furloughed federal workers. The latest data also indicated that December job growth was lower than initially reported.

Market Impact?

The January job growth was much higher than investors expected and implied the partial government shutdown minimally affected the U.S. economy. These perspectives helped drive stock gains on Friday.

This week, we will continue to monitor corporate earnings season and will follow any developments in the U.S.–China trade negotiations. We will also watch for new data releases, especially those previously delayed by the government shutdown. If you have any questions, we’re here for you.

ECONOMIC CALENDAR*

Monday: Motor Vehicle Sales, Factory Orders

Tuesday: PMI Services Index, ISM Non-Mfg Index

Wednesday: Jerome Powell Speaks

Thursday: Jobless Claims

*The federal government shutdown may delay some data releases.

 

 

 

 

Stocks Muted, Big Week Ahead – Weekly Update for January 28, 2019

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For the first time in months, U.S. markets experienced little movement last week. The Dow and NASDAQ did have their 5th week of gains in a row, but their increases were small: 0.12% and 0.11%, respectively. Meanwhile, the S&P 500 broke its 4-week winning streak with a 0.22% loss. Internationally, the MSCI EAFE also posted modest returns, gaining 0.47% for the week.

What topics were on investors’ minds?

Despite the relative lack of market drama last week, investors still had plenty to consider. For example, the following details emerged:

  • Conflicting messages came out on trade tension with China.
  • The International Monetary Fund (IMF) downgraded its forecast for global growth.
  • Corporate earnings season continued.

In addition, the longest Federal government shutdown in history ended. After 35 days, the House and Senate voted unanimously to reopen the partially closed government. President Trump signed the bill, which includes funding through February 15.

This week could provide far more action in the markets when a number of key details emerge.

What’s ahead this week?

 These last days of January provide several noteworthy updates, including:

 One data point we may not receive this week is the initial reading of 4th quarter 2018 Gross Domestic Product. This report is one of many affected by the Federal government shutdown. Although the government has reopened, we have yet to receive the latest data on retail sales, new home sales, durable goods orders, and more.

As the week unfolds, we will analyze all of the information that does come out—and continue to look for ways to pursue our clients’ long-term goals in the current economic environment. If you have any questions about how these details affect your financial life, we’re here to talk.

ECONOMIC CALENDAR*

Tuesday: Consumer Confidence

Wednesday: ADP Employment Report, GDP

Thursday: Jobless Claims

Friday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg Index, Construction Spending, Consumer Sentiment

*The Federal government shutdown may delay some data releases.

 

 

 

The Rally Continues – Weekly Update for January 22, 2019

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U.S. markets were up again last week, as major domestic indexes posted their 4th weekly gains in a row. In fact, the S&P 500 was no longer in correction territory at Friday’s close—and was in the middle of its best yearly start since 1987.

For the week, the S&P 500 gained 2.87%, the Dow added 2.96%, and the NASDAQ increased by 2.66%. So far, all three indexes are up more than 5% in 2019. Internationally, the MSCI EAFE also ended the week in positive territory, posting a 1.06% gain.

What is driving the rally?

Once again, developments in our ongoing trade negotiations with China contributed to the performance. On Thursday, a report emerged that the U.S. was weighing whether to lift tariffs on Chinese imports. However, the Treasury Department said Secretary Steve Mnuchin had not recommended this action. Then, on Friday, Bloomberg released news that China may raise its imports to a level that would close the trade deficit by 2024. This potential sign of progress contributed to the day’s market gains.

While these trade updates significantly affected stock performance last week, the following details are also worth noting:

  1. Corporate earnings season started.

So far, 11% of S&P 500 companies have released their earnings reports for the 4th quarter of 2018. As expected, growth is not as fast as in the last year’s previous quarters, but total earnings are still up 16.9% over the same period in 2017. We are very early in earnings season but anticipate data from another 56 companies coming out this week.

  1. Consumer sentiment missed expectations.

The latest consumer sentiment reading fell to its lowest level since 2016, yet it still remains relatively high. This decline could signal that the current impasse over border-wall funding and the volatile markets are negatively affecting the economy.

  1. Manufacturing beat projections.

The latest data showed that U.S. manufacturing output increased by 1.1% in December. This rate exceeded expectations and may help calm concerns that factory production is slowing.

  1. The government shutdown continued.

Since December 22, parts of the Federal government have been closed, marking the longest shutdown in U.S. history. Economists estimate that each week the shutdown continues could reduce our quarterly growth of Gross Domestic Product by up to 0.2%.

Looking ahead, we will not only have earnings data to consider in this shortened trading week, but also information on home sales and durable goods orders. We’ll continue to monitor economic reports—and geopolitical developments—as we support each client’s long-term goals. As always, if you have questions or concerns, we’re here for you.

ECONOMIC CALENDAR

Monday: Markets Closed for Martin Luther King Jr. Day

Tuesday: Existing Home Sales

Thursday: Jobless Claims

Friday: Durable Goods Orders, New Home Sales

 

 

 

Markets Relax and Rally – Weekly Update for January 14, 2019

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After months of volatility, markets relaxed a bit last week. For the first time since October, the S&P 500 went 5 days without a 1% gain or loss. The Cboe Volatility Index, or VIX, also fell to lower than 20—in December, it spiked above 35.

For the week, the S&P 500 added 2.54%, the Dow gained 2.40%, and the NASDAQ increased 3.45%. All three indexes are in positive territory for 2019. International stocks in the MSCI EAFE grew as well, with a 2.85% weekly gain.

What drove last week’s gains?

Updates on trade and monetary policy contributed to investor decisions, yet again.

  1. The Federal Reserve made dovish comments.

Last week, multiple Fed officials gave speeches indicating our central bank would carefully approach its interest rate decisions in 2019. Fed Chairman Jerome Powell described the policies as “flexible” and “patient.”

  1. A trade resolution seemed more likely.

Many investors believe that efforts to resolve trade tension between the U.S. and China made progress last week. On Wednesday, January 9, talks concluded in Beijing after three days of negotiations, and China said the “in-depth” meetings made a resolution possible. The next day, U.S. Treasury Secretary Steve Mnuchin announced that a high-level Chinese policy advisor is coming to D.C. later this month for further talks.

 What is ahead?

Last week’s trade and policy headlines seemed to ease some of the risks on investors’ minds. However, both challenges and opportunities remain.

This week marks the beginning of U.S. corporate earnings season. Analysts have low expectations for companies’ 4th-quarter performance, especially after a number of large corporations released warnings about their results. However, analysts still predict that S&P 500 companies experienced 14.5% profit growth. In addition, the generally sour, pessimistic mood surrounding earnings could support equities in two ways: 1) Investors may not react strongly if companies miss projections, and 2) any companies that have surprisingly good results could see stock price jumps.

Along with earnings results, investors will be paying close attention to companies’ commentary on business in China. Some experts believe Chinese economic growth is slowing, which is already affecting market performance. On Friday, markets stumbled a bit as analysts considered data and commentary on China’s economy. These details will remain important to watch—and see how they relate to trade.

In addition, while the U.S. federal government shutdown has not yet had a large market impact, if it continues for too long, it could sizably affect the economy

We will continue to monitor these and other financial perspectives as we determine where the markets are—and what may be on the horizon. If you have any questions, we’re here to talk and listen.

ECONOMIC CALENDAR

Tuesday: PPI-FD

Wednesday: Retail Sales, Housing Market Index

Thursday: Housing Starts, Jobless Claims

Friday: Industrial Production, Consumer Sentiment

 

 

 

 

 

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