Month: August 2018

This will be a light week for economic data. Existing home sales for July will be out on Wednesday, followed by new home sales on Thursday. Analysts expect an annualized 5.41 million existing sales and an annualized 641,000 in new home sales.

The minutes from the July Federal Open Market Committee meeting will be released at 2 PM on Wednesday. The Fed held rates steady in July but shifted its policy statement in a slightly hawkish direction. Odds of a September rate hike stand at 94 percent coming into this week, and odds of another hike in December sit at 65 percent.

Flash manufacturing PMIs for August should show a robust expansion in the United States. Economists will focus on foreign PMIs and Europe’s decelerating growth.

The U.S. dollar hit a new 52-week high last week before pulling back. The key levels to watch in the week ahead are 95 and 96.61. The former marked resistance from late May through August, and if the U.S. dollar is breaking out it should stay above it. The latter number is the high from last week. Speculators are more bullish on the U.S. dollar than at any time in the past 15 months.

Long-term bonds look vulnerable to a short-squeeze rally, one that could further lift the U.S. dollar amid weakness in emerging markets. The 10-year yield came into the week at 2.87 percent, the lower end of a nearly seven-month trading range that stretches from 2.7 to 3.1 percent.

Crude oil fell to a $65 handle last week. A surprisingly large inventory buildup sent prices $2 lower on Tuesday and Wednesday. West Texas Intermediate crude hasn’t traded below $64 since April.

Earnings season is winding down, but retail earnings season will continue to pour in this week. Smaller retailers will follow last week’s strong earnings from Home Depot (HD) and Wal-Mart (WMT) that pushed SPDR S&P retail (XRT) to a new 52-week high. Some of the larger firms reporting this week will include Kohl’s (KSS), Lowe’s (LOW), Target (TGT), L Brands (LB), Williams-Sonoma (WSM), Gap (GPS), Ross Stores (ROSS) and Footlocker (FL).

Estee Lauder (EL), BHP Billiton (BHP), Medtronic (MDT), Analog Devices (ADI), Alibaba (BABA), Autodesk (ASDK), Intuit (INTU), HP Inc (HPQ) will also report this week.

The Dow Jones Industrial Average gained 1.41 percent on the week, doubling the 0.59 percent return of the S&P 500 Index. Wal-Mart (WMT) delivered strong earnings, the fastest same-store sales growth in a decade, and 40 percent growth in online sales. Wal-Mart gained nearly 9 percent on the week. The Chinese trade delegation announced plans on Friday to lay out the framework for a larger deal when President Trump and President Xi meet in November.

SPDR Consumer Staples (XLP) increased 3.34 percent this week, SPDR Healthcare (XLV) 1.66 percent, SPDR Industrials (XLI) 1.60 percent and SPDR Financials (XLF) 0.68 percent. In contrast to value stocks, the technology sector was relatively weak. SPDR Technology (XLK) gained 0.19 percent. Invesco QQQ (QQQ) fell 0.34 percent.

The National Federation of Independent Business small business confidence index climbed to the second-highest level in history last month, barely missing the all-time high set in 1983. Retail sales jumped 0.5 percent in July and 0.6 ex-autos, trouncing expectations. Productivity increased 2.9 percent in the second quarter and unit labor costs fell 0.9 percent.

The August National Association of Homebuilders confidence index fell to 67, but that number is still consistent with a booming housing market. Housing start and permits were 1.17 and 1.31 million in July.

Crude oil prices slumped this week on emerging market weakness and surprisingly large inventory increases. Analysts were looking for a 2.4 million barrel decline in crude inventory, but the government reported a 6.8 million barrel increase. West Texas Intermediate crude closed the week at $65.88 per barrel.

The U.S. dollar declined slightly this week as emerging market fears faded. iShares MSCI Emerging Markets (EEM) was down more than 4 percent midweek, but it finished with a loss of 2.27 percent. iShares MSCI EAFE (EFA) dipped 0.52 percent. SPDR S&P 500 (SPY) gained 0.64 percent. iShares MSCI Turkey (TUR), rallied back from an 11 percent lose and ended the week with a small decline of 0.70 percent.

In addition to Wal-Mart (WMT), Home Depot (HD) reported $3.05 per share in earnings versus $2.84 expected. Nvidia (NVDA), however, suffered as cryptocurrency prices collapsed. Cryptocurrency miners have gravitated to Nvidia’s chips over the past year, but the company gave weaker-than-expected forward guidance as it anticipates a significant drop in demand.