Month: September 2017

Equities climbed into record territory this week. Energy and insurance rebounded strongly and every major sector moved higher except utilities, which was weighed by rising interest rates. The Dow Jones Industrial Average and Russell 2000 were the strongest of the major indexes. They rose 2.16 and 2.31 percent, respectively.

Speculators prepared for Hurricane Irma by selling insurers ahead of the storm. They spent the early part of this week unwinding those trades. SPDR S&P Insurance (KIE) climbed 2.72 percent this week. Energy was also a winner. The recovery from Harvey is bringing supply back online. Demand is also stronger than expected thanks to Irma weakening. SPDR Energy (XLE) rallied 2.24 percent. West Texas Intermediate crude oil moved above $50 on Thursday.

Weekly jobless claims hit 284,000, slightly down from last week and below estimates. It’s still about 40,000 higher than the pace seen before the hurricanes. Retail sales missed expectations, falling 0.2 percent. Sales ex-autos increased 0.2 percent.

The Job Openings and Labor Turnover Survey showed 6.2 million openings. The quit rate climbed to 2.2 percent. The Producer Price Index (PPI) rose 0.2 percent in August. Average oil prices were about 10 percent higher than August 2016. This bump will fade in the coming months unless oil sustains a rally into the mid-to-upper $50 range. Consumer prices also rose with gasoline prices and rent. Core inflation met analyst forecasts of 0.2 percent. Consumer sentiment remained strong in September, though the hurricanes likely contributed to the small decline from the August reading.

Chinese fixed-asset investment and industrial production has slowed. Copper is down 7 percent from its high a week ago. China’s credit growth is slowing as well. The money supply growth rate hit a new 20-year low in August. Bank loans have increased slightly, due primarily to the crackdown on shadow banking.

Apple (AAPL) unveiled the iPhone 8 and iPhone X this week. The iPhone X uses face recognition technology to unlock and the cheapest version will retail for $999. Shares of Apple fell as traders reversed bets made ahead of the announcement.

North Korea fired another missile over Japan on Friday morning (local time), but the news barely impacted financial markets. iShares MSCI South Korea (EWY), the fund most sensitive to North Korean provocation, rallied 0.61 percent on Friday. Defense stocks rallied as well. iShares U.S. Aerospace & Defense (ITA) gained 1.79 percent on the week.

Oracle (ORCL) beat earnings and sales estimates this week, but guidance disappointed investors. Cloud services increased 50 percent. Software and services increased 62 percent. Going forward, Oracle sees that growth slowing to around 40 percent. Analysts forecast earnings of 68 cents in the coming quarter, but Oracle guided them down to a range of 64 to 68 cents. Shares fell 7.67 percent on Friday. The dip weighed on iShares North American Software (IGV), which dipped 0.84 percent. Broader technology funds such as Vanguard Information Technology (VGT) climbed on the day. VGT increased .50 percent on the week.

Stocks quickly moved into record territory this week as hurricane risks subsided and recovery began.

Only the Russell 2000 Index has yet to make a new all-time high in September.

Financials have rebounded strongly in the past week as SPDR S&P Insurance (KIE) regained half of August’s 9-percent losses.

The 10-year Treasury yield also rallied sharply over the past week after hitting a new 2017 low. Regional banks benefited the most from rising rates.

The utilities sector suddenly reversed on Tuesday from last week’s 52-week high in response to rising rates.

All major healthcare subsectors (biotech, pharma, medical devices and healthcare providers) have advanced since mid-August following merger activity, successful drug trials and government approvals.

SPDR Technology (XLK) hit a new all-time high on Tuesday, but tech followed Apple (AAPL) lower on Wednesday as speculators exited ahead of the iPhone X launch.

Oracle (ORCL) will report earnings on Thursday. The consensus forecast calls for earnings of 60 cents per share.

Oil prices fell on hurricane volatility, but rallied as the storm weakened.

Energy-related equities have rallied sharply. SPDR Energy (XLE) is approaching a record high for the first time since early August.

The U.S. dollar fell to a new 52-week low in September, but rebounded in the past week. SPDR S&P 500 (SPY) has kept pace with iShares MSCI EAFE (EFA) since early August. SPY has also outperformed iShares MSCI Emerging Markets (EEM) since late August.

The BRICs are pulling emerging markets higher, while smaller markets such as Greece consolidate gains.

Homebuilder stocks hit a new 52-week high in September. Falling long-term interest rates have boosted the sector in the last week.

Equities opened higher on Monday after Hurricane Irma weakened rapidly on Sunday. SPDR S&P Insurance (KIE) rose 3 percent at the opening to its highest level in two weeks. The 10-year Treasury yield rebounded above 2.1 percent for the largest one-day rally in nearly a month. The odds of a December rate hike jumped 10 percent in the futures market to 41 percent. SPDR Utilities (XLU) hit a new 52-week high.

U.S. Gasoline (UGA) has reversed about half of its storm-related rally, while oil climbed.  Chemical companies also advanced strongly. DowDuPont (DWDP) climbed near its 52-week high on Monday.

Building material companies fell on Monday as investors reassessed the cost of rebuilding. Martin Marietta Materials (MLM) fell nearly 4 percent and Vulcan Materials (VMC) nearly 3 percent. Martin Marietta Materials had gained 9 percent in the wake of Hurricane Harvey.

Healthcare also achieved a new 52-week high on Monday. Pharmaceuticals and healthcare providers led the sector, while biotechnology saw a slight decline in early trading. Although the overall biotech sector was down, key large-cap stocks Amgen (AMGN) and AbbVie (ABBV) rose to new 52-week highs. In the past three weeks, AbbVie has gained 23 percent, Gilead Sciences (GILD) 17 percent, Biogen (BIIB) 16 percent and Amgen (AMGN) 11 percent.

This week a slew of third-quarter economic data will be released. Tuesday will bring the JOLTS report for July. Economists forecast 5.97 million job openings. August inflation data will be out on Wednesday and Thursday. First, the producer price index is expected to have risen 0.3 percent, well above July’s decline of 0.1 percent. The CPI is also forecast to rise 0.3 percent, with core prices rising 0.2 percent. Retail sales for August will be available on Friday. Analysts predict a rise of 0.1 percent, 0.4 percent ex-autos. Business inventories for July and consumer sentiment in September will also be out on Friday.

China will report fixed-asset investment, real estate investment, industrial production and new loans this week. Canadian housing starts in August beat expectations. The July home price index will be out later this week. The Canadian central bank hiked interest rates last week, fully reversing cuts made as oil prices plummeted between late 2014 and early 2016. The cuts overheated an already booming housing market that is starting to unravel in cities such as Toronto.

We are in the lull before third-quarter earnings season kicks off in October, but a few notable firms will continue to stream in.  Analysts predict Oracle (ORCL) earned 55 cents per share, up from 49 cents last year. Oracle is a top-10 holding in many technology funds.

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.