Month: August 2018

Important Notice for Fidelity Investors: On Friday, Fidelity split more than a dozen funds.  Many popular funds were split, including Contrafund (FCNTX), Magellan (FMAGX), Biotechnology (FBIOX), Technology (FSPTX) and Healthcare (FSPHX).  Mutual funds splits work like stock splits. The number of shares increased 10 times and the price of the fund declined to one-tenth. The value was unchanged and there are no tax implications.

Several data providers didn’t receive immediate updates to accurately reflect this split in client accounts. Many weekly performance reports showed losses of roughly 90 percent. Fidelity delayed splitting these funds in June due to trouble on its website. This split should now be complete and account reports should begin to reflect the accurate number of shares and dollar values.

We have never witnessed such an issue when working with Charles Schwab or Vanguard. If you have concerns regarding your custodian, please call me at 888-252-5372.

Retail sales for July will be out on Wednesday. Analysts forecast headline growth of 0.1 percent and 0.3 percent ex-autos. Industrial production for July will also be out on Wednesday and is expected to rise 0.4 percent. The homebuilders’ confidence index and consumer sentiment for August, as well as housing starts and building permits for July will round out this week’s major releases.

China reported 1.45 trillion yuan in new loans for July. It was higher than expected, but infrastructure loans were also much higher than forecast. The Chinese government wants loans to flow to small and medium companies, and not into local government infrastructure projects or real estate speculation. July fixed-asset and real estate investment, along with retail sales, should be out overnight. Later in the week, Canada and the Eurozone will report inflation data.

The U.S. Dollar Index saw a very slight gain on Monday. Small advances versus the euro and Canadian dollar were offset by weakness against the yen and Swiss franc. The dollar was much stronger against emerging-market currencies. WisdomTree Emerging Currency (CEW) fell 1.5 percent.

iShares MSCI Turkey (TUR) fell 11 percent on Monday. European banks have exposure via loans to Turkey and that sent iShares MSCI Europe Financials (EURN) down 0.67 percent. Global X Greece (GREK) fell 3.38 percent. Overnight, the South African rand flash crashed 10 percent before recovering. The Brazilian real is at 3.91 per U.S. dollar, near the 4.0 level that traders think could spark more emerging market selling. iShares MSCI Emerging Markets (EEM) declined 1.55 percent. It closed 0.4 percent above its 52-week low, set on June 26.

Retail earnings season kicks off this week with Advance Auto Parts (AAP) and Home Depot (HD) on Tuesday. Macy’s (M), Wal-Mart (WMT) and Nordstrom (JWN) will follow. Although many brick-and-mortar stores have struggled mightily in recent years, SPDR S&P Retail (XRT) hit a new all-time high on Friday with rising consumer spending.

This will also be a big week for technology earnings.  Cisco (CSCO), NetApp (NTAP), Nvidia (NVDA) and Applied Materials (AMAT) will all report.

The Russell 2000 Index led index performance this week with an 0.80-percent gain thanks to its reduced exposure to emerging markets. The Dow Jones Industrial Average and S&P 500 Index declined on Friday after Turkey’s currency collapse dragged on emerging markets, European banks and U.S. stocks.

6.7 million job openings were reported in June, more than the number of unemployed workers. Initial claims for unemployment were 213,000.

Producer prices were flat in July, missing expectations of 0.2 percent. The core PPI increased 0.3 percent. Consumer price inflation and core CPI met 0.2-percent growth expectation. Core inflation increased 2.4 percent over the past 12 months. Although higher inflation is normally bullish for interest rates, the 10-year Treasury yield slid to a three-week low after emerging markets slid on Friday.

Consumer discretionary, telecom and technology were the best performing sectors this week. A strong earnings report from CenturyLink (CTL) lifted iShares U.S. Telecom (IYZ) 2.11 percent. SPDR Consumer Discretionary (XLY) and SPDR Technology (XLK) advanced 0.77 and 0.43 percent.

iShares MSCI Turkey (TUR) fell 20.58 percent and its tumbling currency was responsible for nearly all the losses this week.

The turmoil in Turkey weighed on the euro. iShares MSCI Europe Financials (EUFN) slid 2.91 percent on the day. The U.S. Dollar Index gained 1.4 percent on the week and broke out to a new 52-week high. SPDR S&P 500 (SPY) slipped 0.16 percent on the week. iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) fell 2.03 and 2.31 percent, respectively. Sanctions on Russia also sank the ruble. WisdomTree Emerging Currency (CEW) slid 2.47 percent.

Friday’s weakness in Turkey also weighed on China, but iShares China Large-Cap (FXI) gained 1.50 percent for the week after stock market reforms, including encouraging stock buybacks.

Crude oil ended the week at $67.78 per barrel. Crude has traded in a range between $66 and $70 a barrel over the past three weeks. Natural gas rallied this week and approached a two-month high.

Tesla (TSLA) CEO Elon Musk secured financing to go private at $420 per share. TSLA gained nearly 15 percent from low to high on the day as a short squeeze accelerated.

This was a light week for earnings. Disney (DIS) increased earnings but missed revenue forecasts. Shares rallied after the analyst conference call after management talked up its coming streaming service. CVS Health (CVS) rallied all week after it beat profit and sales estimates.