Year: 2018

The Federal Reserve will likely raise interest rates by 25 basis points this week. Bond markets started pricing in the move in late August.

The 10-year Treasury yield traded near 3.10 percent on Monday, a four-month high. Floating-rate and short-term bond funds benefit from rising rates as the interest on their securities resets higher. Investors have priced higher rates into the short-end of the yield curve. Spreads risk widening as higher rates are priced into the long-end of the yield curve.

Economists expect second-quarter GDP growth will be revised higher to 4.3 percent. Analysts see new home sales holding steady at an annualized pace of 625,000. August durable goods orders should rise 2.2 percent after dipping 1.7 percent in July. The Bureau of Economic Analysis will release its inflation measure on Friday. August core PCE is forecast to have risen 0.1 percent, down from 0.2 percent in July.

State Street rebalanced their Select Sector ETFs last week and quickly made an impact on returns today. Comcast (CMCSA) left the consumer discretionary sector for the new communication services sector. Shares slid after the company acquired Sky Broadcasting over the weekend, weighing on SPDR Communication Services (XLC). SPDR Disney (DIS) and Netflix (NFLX) both rallied on the news. SPDR Technology (XLK), now free of Facebook (FB) and Alphabet (GOOG), rose 0.50 percent as software stocks rallied. iShares North American Software (IGV) gained 0.73 percent.

Crude oil climbed to a two-month high on Monday and closed above $72 a barrel. SPDR Energy (XLE) climbed 1.46 percent to a two-month high. The U.S. Dollar Index was flat and stable versus most emerging-market currencies. Nevertheless, selling resumed in emerging markets with iShares MSCI Emerging Markets (EEM) losing 1.13 percent on the day.

Nike (NKE) will headline a light week in earnings reports. KB Home (KBH), CarMax (KMX), Accenture (ACN), Carnival (CCL), ConAgra (CAG) will also report.

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.