Month: September 2018

Equities hit new all-time highs this week led by a strong rebound in value sectors and the Dow Jones Industrial Average. The DJIA rallied 2.25 percent and the S&P 500 Index climbed 0.85 percent. The Nasdaq fell 0.15 percent.

SPDR Financials (XLF) gained 2.26 percent to lead major sectors with strength in insurers. SPDR Industrials (XLI) rose 1.66 percent. SPDR Technology (XLK) lost 0.10 percent. SPDR Communication Services (XLC) rose 0.64 percent as allocations began migrating to the new sector.

Initial claims for unemployment fell to 201,000, the lowest claims total since 1969.

Homebuilder confidence for September matched August’s figure. Housing starts in August beat expectations at an annualized pace of 1.28 million. Starts have increased 6.9 percent in 2018 versus the first eight months of 2017. Existing home sales in August held at an annualized pace of 5.34 million.

The flash manufacturing PMI reflected strengthening in the manufacturing sector. Europe’s flash PMI was lower than expected.

Long-term interest rates started rising ahead of next week’s rate hike. The 10-year Treasury yield hit 3.10 percent before pulling back. Floating-rate funds outperformed this week. Invesco Senior Loan (BKLN) rose 0.22 percent.

Foreign stocks rebounded strongly this week with foreign currencies. iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) advanced 2.80 and 3.03 percent, respectively. SPDR S&P 500 (SPY) returned 0.84 percent. Invesco DB U.S. Dollar Index Bullish (UUP) slid 0.75 percent. WisdomTree Emerging Currency (CEW) gained 0.86 percent.

Earnings reports and reactions were mixed this week. FedEx (FDX) shares fell more than 3 percent on the week, while Oracle’s (ORCL) gained more than 3 percent. General Mills (GIS) sank nearly 7 percent on the week after reporting contracted margins. Shares of Micron (MU) rallied after it beat profit expectations, but general weakness in the semiconductor sector left shares nearly flat on the week.

Stocks were mixed on Monday. Consumer staples, utilities and materials rose, offset by weakness in technology and consumer discretionary. The Dow Jones Industrial major index performance with a 0.35-percent decline.

SPDR Consumer Staples (XLP) gained 0.38 percent, SPDR Materials (XLB) 0.35 percent and SPDR Utilities (XLU) 0.33 percent. SPDR Technology (XLK) and SPDR Consumer Discretionary (XLY) fell 1.25 and 1.24 percent. Amazon (AMZN) weighed on consumer discretionary after news of bribes and data leaks. Employees at the firm have offered to share company data with merchants, as well as delete negative reviews, in return for cash. Twitter (TWTR) and Netflix (NFLX) were among the top-10 largest decliners on Monday. Online pharmacy Express Scripts (ESRX) and supermarket Kroger (KR) were among best performers.

Homebuilder confidence for September will be out on Tuesday, followed by August housing starts, building permits and existing home sales over the next two days. Economists are looking for a very slight downtick in homebuilder confidence, an uptick in starts, flat permits and slightly weaker home sales.

Economists also see jobless claims staying near four-decade lows at 208,000. Last week’s 204,000 initial claims brought the 4-week moving average to its lowest point since December 1969.

Flash manufacturing PMIs are due at the end of the week. The key figure to watch will be Europe’s PMIs relative to the U.S. because it will impact currency markets. The euro rallied versus the dollar last week after European Central Bank President Mario Draghi sounded hawkish on inflation. However, some investors have grown cautious over signs of slowing European growth. Europe’s manufacturing PMI was higher than the U.S. figure for all of 2017, but fell below the U.S. PMI in 2018. The shifting pace of growth in both economies contributed to this year’s strength in the dollar.

President Trump will announce a new round of tariffs on China later tonight. Although there was talk of restarting negotiations, both sides have intensified their rhetoric. National Economic Council Director Larry Kudlow said the U.S. was ready to talk whenever China shows they’re ready for “serious and substantive negotiations.” Over the weekend, China’s former Minister of Finance said the country could block key exports as part of a retaliation strategy.

The 10-year Treasury yield climbed past 3 percent on Monday. It cracked 3 percent back in April and held above that level for about a month before falling back into a tight trading range between 2.80 and 3.00 percent. Rates started moving across the board in late August with a September rate hike less than two weeks away. Libor, 3-month Libor, the 2- through 30-year Treasury yields have all been climbing as investors price in that hike. December rate hike odds are above 80 percent.

Crude oil rallied above $69 per barrel in early Monday trading, but settled back to $68 later in the day.

FedEx (FDX) and Oracle (ORCL) headline an otherwise light week for earnings news. Analysts predict $3.71 per share in earnings from FedEx and $0.69 per share from Oracle. Micron (MU) will report later this week. Shares have declined nearly 30 percent since March. Autozone (AZO) and General Mills (GIS) will also report this week.

Technology, consumer discretionary, industrials and healthcare led the market this week. The Nasdaq gained 1.36 percent.

Software heavyweight Microsoft (MSFT) advanced this week, boosting iShares North American Software (IGV) 3.54 percent higher. SPDR Technology (XLK) gained 1.85 percent. Netflix (NFLX) lifted SPDR Consumer Discretionary (XLY) 1.16 percent. iShares U.S. Medical Devices (IHI) advanced 2.61 percent and heavily influenced SPDR Healthcare’s (XLV) gain of 1.06 percent. SPDR Industrial (XLI) increased 1.91 percent, despite tariff rhetoric.

The National Federation of Independent Business small business confidence index reached a new all-time high in August. The prior record was set in 1983.

Job openings rose again in July, to an all-time high of 6.9 million. Job openings have exceeded unemployed workers since April.

Inflation rose slower than forecast in August. Producer prices fell 0.1 percent and missed expectations of a 0.2 percent increase. Consumer prices increased 0.2 percent and core prices rose 0.1 percent. Both missed by 0.1 percentage points. Speculations are still betting on two more hikes this year, one later this month and another in December.

Initial claims for unemployment slumped to 204,000 last week. It’s the lowest weekly figure since December 1969. The 4-week moving average fell to 208,000.

August retail sales missed forecasts of 0.3 percent growth, coming in at 0.1 percent. Sales ex-autos were up 0.2 percent. While autos were partly responsible for the retail sales miss, the sector was also responsible for a surprise uptick in August industrial production to 0.4 percent growth. These strong reports boosted the Atlanta Federal Reserve’s GDP Now third-quarter GDP growth forecast from 3.8 to 4.4 percent.

The University of Michigan’s Consumer sentiment exceeded expectations in early September. The index had been running slightly cooler than the Conference Board’s measure and economists forecast a reading of 96.2, but it jumped to 100.8. Current economic conditions climbed with consumer expectations. Aside from a higher reading earlier this year, the last time the index was this high was back in 2004.

Bond yields rallied along with solid economic data this week. The 10-year Treasury traded above 3 percent for the first time in six weeks. The 5-year yield hit a four-month high. Crude oil rallied above $70 a barrel mid-week on a surprise inventory draw but gave back most of the gains. It finished at $69 a barrel.