Month: September 2017

Energy, consumer staples and healthcare led this week, but the overall market drifted lower as investors assessed Hurricane Irma. SPDR Energy (XLE), Consumer Staples (XLP) and Healthcare (XLV) rallied 1.29, 0.22 and 1.61 percent respectively. SPDR S&P Insurance (KIE) fell 2.76 percent. Shares were down more than 5 percent by Thursday, but rallied sharply on Friday.

Economic data was solid this week. July factory orders fell 3.3 percent, but rose when aircraft orders were subtracted. A large order for Boeing (BA) jets in June made for a tough comparison in July. The ISM nonmanufacturing index rose from 53.9 in July to 55.3 in August, signaling a more robust expansion. Initial unemployment claims jumped to 298,000, due solely to hurricane activity. Once rebuilding starts, we will see an even larger sustained increase in employment.

Medical devices and pharmaceuticals lifted healthcare. iShares U.S. Medical Devices (IHI) climbed 2.05 percent this week, SPDR S&P Pharmaceuticals 0.84 percent. Last week’s buyout of Kite Pharma (KITE) by Gilead Sciences (GILD) and landmark approval of Novartis’ genetically-engineered leukemia drug carried over into this week’s profits. AbbVie (ABBV) announced a successful eczema study this week. Shares rallied more than 10 percent on the news.

Energy stocks performed well this week, but commodity prices were volatile. As the recovery from Hurricane Harvey begins, the reopening of oil pipelines and refineries has raised oil prices, while lowering gasoline prices. Hurricane Irma will dampen demand for both crude and gasoline in the short-term. U.S. Gasoline (UGA) fell 5.45 percent on the week.

United Technologies’ (UTX) bid for Rockwell Collins (COL) weighed on iShares U.S. Aerospace & Defense (ITA). ITA fell 1.43 percent on the week.

Kroger (KR) shares slid double-digits early Friday morning, despite meeting earnings estimates and beating revenue forecasts. Investors worry Amazon’s (AMZN) price war will cut into margins going forward. Target (TGT) announced price cuts on thousands of items in response to Amazon’s recent Whole Foods cuts.

Stocks opened the week choppy as geopolitical concerns in North Korea and another wave of hurricane activity contributed to volatility.

Isolated pipelines and refineries restarted this week, alleviating some of the weather-related supply concerns. Shares of U.S. Gasoline (UGA) fell more than 3 percent on Tuesday morning, while West Texas Intermediate crude oil climbed towards $49 a barrel.

The 10-year and 5-year Treasury bond yields broke to new 2017 lows. Bank stocks have tracked the movement in these yields over the past year. Speculators in the futures market put the odds of a December rate hike at 36 percent on Tuesday.

Factory orders fell 3.3 percent in July. Leaving out aircraft, orders climbed 1 percent. Analysts expected the dip following a surge in June orders for Boeing (BA) aircraft that inflated June orders. Services PMIs, revised productivity and unit labor costs for the second quarter, plus wholesale inventories and consumer credit in July will be out later this week.

The Bank of Canada will meet on Wednesday. Economists expect rates will remain steady at 0.75 percent. China’s trade data will be out on Friday. Chinese consumer and producer price data is tentatively scheduled for Friday.

We are in the quiet period for earnings season. Major reports this week will include Donaldson Company (DCI), Barnes & Noble (BKS) and Kroger (KR) on Friday. The latter may be the most important earnings report this week as investors contemplate Amazon’s (AMZN) entry into supermarkets. Kroger stock has fallen 25 percent since Amazon announced its purchase of Whole Foods.

iShares U.S. Aerospace & Defense (ITA) fell on merger news after United Technologies (UTX) announced it will buy Rockwell Collins (COL). UTX is 7.81 percent of ITA and COL is 4.32 percent. As is usually the case, shares of the acquirer fell and the target rose, weighing on the fund. Investors in ITA have seen no change in the makeup of the fund, but the UTX buyout has lightened its value. Shares of companies involved in missile defense, such as Raytheon (RTN and Lockheed (LMT), have rallied in response to North Korean hostility.