Year: 2018

Major indexes were lower this week as interest rates broke out to the upside. The Dow Jones Industrial Average finished the week with a loss of 0.06 percent.

U.S. treasury yields exited a seven-month consolidation pattern this week. The 10-year treasury yield hit 3.23 percent on Wednesday. The next target is 3.50 percent. iShares U.S. 20+ Year Treasury (TLT) fell 3.38 percent on the week, but PowerShares Senior Loan Portfolio (BKLN), which holds floating-rate securities, gained 0.09 percent.

Yields rose following hawkish comments from Fed chair Jerome Powell, a strong ADP payroll report and a solid employment report on Friday. The ADP reported 230,000 new private sector jobs. The government came in lower at 134,000, missing expectations of 168,000, but hurricanes were blamed for the miss. The government revised job growth in July and August higher and unemployment fell to 3.7 percent. Wage growth moderated from August.

Earlier in the week, manufacturing and services PMIs showed robust U.S. expansion. Auto sales hit an annualized pace of 17.4 million in September, beating expectations of 17.0 million and the prior month’s 16.7 million pace. Factory orders increased 2.3 percent in August, exceeding forecasts. In light of this week’s data, the Atlanta Federal Reserve’s GDP Now model increased its third-quarter GDP growth estimate to 4.1 percent.

Rising yields benefited financials and industrials. SPDR Financials (XLF) gained 1.56 percent on the week and SPDR Industrials (XLI) gained 0.73 percent. SPDR Consumer Discretionary (XLY) slid 4.22 percent, hurt by growing concerns about retail wages. Amazon (AMZN) announced it would raise its minimum wage to $15 an hour and raises to other hourly workers, but it comes at the expense of incentives and stock options. Although SPDR Utilities (XLU) initially fell when rates broke higher, it gained 1.90 as some traders positioned defensively.

Rising interest rates sent the U.S. dollar higher versus major currencies, while a battle over the Italian budget weighed on the euro. The U.S. Dollar Index advanced 0.60 percent on the week. SPDR S&P 500 (SPY) outperformed its foreign competition by a wide margin despite losing 0.97 percent. iShares MSCI EAFE (EFA) slid 2.28 percent and iShares MSCI Emerging Markets (EEM) tumbled 4.82 percent. Domestic equities remain in a strong bull market and a relative bull market versus foreign shares.

The Dow Jones Industrial Average led major indexes on Monday as General Electric (GE) announced the departure of CEO John Flannery after only 13 months at the helm. Incoming CEO Lawrence Culp was CEO of Danaher Corp from 2000 to 2014. He has served on GE’s board of directors since February. GE rallied 7.09 percent on Monday, the DJIA 0.73 percent.

Tesla (TSLA) reached a settlement with the SEC over the weekend. Musk will pay a $20 million fine and cannot serve on the board for three years, but he can remain CEO. Tesla gained 17.35 percent on Monday.

Crude oil topped $75 a barrel for the first time since early July today. It hasn’t sustained a move above $75 since before 2014, when it traded for more than $100 a barrel. Natural gas climbed past $3.10 for the first time since February. Energy was the best performing sector. SPDR Energy (XLE) gained 1.39 percent.

Manufacturing PMIs were solid for September, though PMIs in Europe and Asia softened. September auto sales will be out on Tuesday. Analysts see weekly unemployment claims holding steady around 215,000. The big employment report will be out on Friday. Average hourly earnings are forecast to rise 0.3 percent. Federal Reserve officials will give their first public comments since hiking interest rates last week.

The U.S. Dollar Index rose after the United States struck a deal with Canada that preserves the NAFTA framework of a North American free trade zone. One important provision in the new deal will require increased auto production in North America, which will benefit all three countries to some degree. Additionally, Canada has agreed to a clause that limits its ability to sign a free trade agreement with a non-market economy, such as China.

Earnings season won’t kick off in earnest for a few more weeks, but Pepsi (PEP) will report on Tuesday, followed by Paychex (PAYX), Lennar (LEN) and Costco (COST) later in the week.

The Nasdaq climbed 0.74 percent. SPDR Technology (XLK) rallied 0.95 percent and SPDR Healthcare (XLV) rose 0.89 percent. Although the 10-year treasury yield crossed 3.10 percent mid-week, it ended down for the week at 3.06 percent. Utilities rallied in response to lower rates, while financials declined.

The Dow Jones Industrial Average led third-quarter index performance with a gain of 9.01 percent. The S&P 500 Index climbed 7.20 percent, the Nasdaq 7.14 percent and the Russell 2000 3.26 percent.

SPDR Healthcare (XLV) advanced 14.45 percent in the third quarter, SPDR Industrial (XLI) 9.98 percent, and SPDR Technology (XLK) 8.80 percent.

The Federal Reserve hiked interest rates a quarter point this week, as expected. The accompanying policy statement removed language calling the current level of interest rates “accommodative.” Interest rate forecasts over the next two years moved in a slightly hawkish direction. The odds of a fourth rate hike at the December meeting, peaked at 83 percent on Thursday before ending the week at 76 percent.

New home sales reached an annualized pace of 629,000 in August, better than the consensus forecast of 625,000. The third and final estimate of second-quarter GDP growth held steady at 4.2 percent. August personal income, consumer consumption and core inflation numbers all missed forecasts, but only by 0.1 percentage points. Durable goods orders climbed 4.5 percent in August, beating estimates of 2.2 percent and above July’s decrease of 1.2 percent.

Consumer confidence surged in September to 138.4, the highest since the year 2000. Crude oil rallied past $73 a barrel this week. The high for the year is $75 a barrel, set in early July.

The Fed rate hike and a resumption of debt worries in Italy sent the greenback higher by 1 percent this week. Nearly all gains came at the expense of the euro and yen. Emerging-market currencies rallied. WisdomTree Emerging Markets Currency (CEW) rose 0.55 percent.  iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) fell 0.95 and 0.72 percent, respectively. For the quarter, SPDR S&P 500 (SPY) gained 7.65 percent, handily beating EFA and EEM’s returns of 1.51 and negative 0.95 percent.

Nike (NKE) delivered solid earnings results, but shares dipped 0.97 percent for the week.

Shares of Tesla (TSLA) fell 11.48 percent on the week after the SEC announced it was suing CEO Elon Musk. The SEC is focused on Elon’s tweet about having “funding secured” for going private at $420 per share. They want Musk barred from being an officer in any public firm.