Month: July 2017

The Dow Jones Industrial Average, S&P 500 and Russell 2000 closed at new all-time highs this week. The Nasdaq led with a gain of 2.59 percent, the S&P 500 climbed 1.41 percent, the Dow 1.04 percent, and the Russell 2000 0.92 percent. Technology led the week’s sector performance, with SPDR Technology (XLK) up 3.36 percent. SPDR Materials (XLB) and SPDR Industrials (XLI) hit new 52-week highs, and SPDR Healthcare (XLV) gained 1.33 percent.

Inflation cooled in June. Headline consumer price inflation was flat, while core inflation eased to 0.1 percent. Both were 0.1 percentage points below estimates. Headline inflation over the past 12-months fell from 1.9 percent in May to 1.6 percent in June as energy related inflation evaporated. The average price for a barrel of crude oil was $49 in June 2016 and $45 in June 2017. Core inflation held steady at 1.7 percent. Producer price inflation rose 0.1 percent, above estimates of 0.0 percent.

Retail sales declined 0.2 percent in June versus estimates of 0.2 percent growth, due in part to falling gasoline prices. Gas station sales fell 1.3 percent. The Atlanta Federal Reserve adjusted its second-quarter GDP estimate to 2.4 percent following the report.

Industrial production rose 0.4 percent in June, exceeding expectations. Business and wholesale inventories increased more than anticipated in May. The University of Michigan consumer sentiment survey eased to 93.1 in July, down from 95.1 in June.

Initial claims for unemployment were 247,000 last week, in line with estimates. The figures remain at four-decade lows. According to the Job Openings and Labor Turnover Survey (JOLTS), job openings fell by 300,000 in May to 5.67 million as hiring jumped to 429,000. Businesses added new workers at the fastest pace since 2004.

Janet Yellen’s testimony before Congress predictably sent the 10-year Treasury yield lower and the market odds of a December rate hike below 50 percent. The German 10-year government bond yield, which had been moving in tandem with U.S. 10-year, continued rising over the past week.

Earnings season kicked off this week with Pepsi (PEP), Delta Air Lines (DAL), J.P Morgan (JPM), Citigroup (C) and Wells Fargo (WFC) reporting.

Pepsi beat earnings and sales estimates, but shares fell amid weakness in the consumer staples sector this week. Delta missed recently-inflated estimates, but shares held steady. The airline ETF U.S. Global Jets (JETS) climbed to a new 52-week high.

J.P. Morgan beat earnings estimates by 8 percent, but shares fell on weak guidance. The bank lowered its forecast for net-interest income by 11 percent. Wells Fargo followed in the footsteps of the other mega banks. The bank earned $1.07 per share, 6 cents better than estimates. Citigroup beat estimates as well.

Strong earnings at the mega banks pushed the consensus S&P 500 blended earnings growth rate to 6.8 percent, up from the initial 6.6 percent estimate on June 30.

Federal Reserve Chair Janet Yellen testified before Congress on Wednesday, focusing on gradual rate hikes and balance sheet reduction plans. Her comments did little to sway December rate hike odds, which remain near 50 percent, though the U.S. 10-year Treasury yield fell following Yellen’s testimony.

Technology and consumer discretionary shares both rallied. The industrial sector hit a new 52-week high on Wednesday.

Healthcare could hit a new high in the week ahead. Shares of SPDR S&P Pharmaceuticals (XPH) rallied strongly on Wednesday. Pharma shares are a little more than 1 percent away from a new 2017 high.

The Canadian dollar rallied more than 1 percent on Wednesday after the Bank of Canada raised interest rates to 0.75 percent, the first increase since 2010. This put downward pressure on the U.S. Dollar Index, but it held above 95.

The euro also hit a new 52-week high.

Agricultural commodities rallied in July due to a drought that damaged half of Montana’s wheat crop, sending the Wheat ETF up 17 percent over the past month.

Agricultural prices have been in a long-term decline. In addition to the weaker U.S. dollar, generally crop yields have been strong and inventories high over the past few years.

Delta’s (DAL) earnings are expected to come in at $1.65 per-share when the firm reports on Thursday.

Strong jobs data propelled homebuilders to a new 52-week high.

J.P. Morgan (JPM), Citigroup (C) and Wells Fargo (WFC) will officially kick off earnings season on Friday. Recent dividend hikes and rising interest rates have been bullish for bank shares.

Equities continued to move higher following Friday’s positive jobs report. Financials and industrials are both nearing all-time highs. iShares U.S. Home Construction (ITB) hit another new 52-week high last week and opened at a new high on Monday.

Inflation data for June will be released this week. Consumer prices are expected to reflect a 0.1-percent rise, while producer price estimates are flat. Core CPI and retail sales ex-autos are both anticipating a 0.2-percent rise in June. Industrial production, capacity utilization and consumer sentiment are all expected to rise. Wholesale and business inventories will also be out this week, and both numbers will heavily influence second-quarter GDP estimates. The Atlanta Fed most recently forecast 2.7 percent growth on July 6.

West Texas Intermediate crude started the week at $44 a barrel. A large drawdown lifted prices marginally, but gasoline demand remains muted and U.S. production is rising.

Pepsi (PEP) will release earnings on Tuesday. Analysts expect $1.40 per-share, up from $1.35 a year ago. Delta Air Lines (DAL) will report on Thursday to forecasts of $1.64 per-share, up from $1.47 a year ago. U.S. Global Jets ETF (JETS) hit a new all-time high on Friday and investors anticipate a strong earnings season for the airline sector.

J.P. Morgan (JPM), Wells Fargo (WFC), Citigroup (C) and regional bank PNC Financial Services (PNC) will report earnings on Friday. These four banks combine for $860 billion in market capitalization. JPM, WFC and C account for 25 percent of SPDR Financial (XLF). The consensus forecasts call for $1.55 per-share at J.P. Morgan, $1.03 for Wells Fargo, $1.23 at Citigroup and $2.01 at PNC.