Year: 2018

The week ended with a strong jobs report. Employers added 201,000 new jobs in August and average hourly earnings doubled forecasts with a 0.4-percent increase. Rising wages pushed the 10-year Treasury yield up to 2.94 percent, its highest level in nearly a month. The odds of a December rate hike jumped from 71 to 80 percent on the news.

Earlier in the week, the ISM manufacturing index climbed to 61.3 percent, crushing forecasts of 57.9 percent. It was the highest reading since 2004. The ISM services index was strong too, rising to 58.5 percent from 55.7 percent in July. Both indexes signal expansion when above 50 percent. Motor vehicle sales eased to an annualized pace of 16.7 million, down 0.1 million from July.

The trade deficit widened to a higher-than-expected $50.1 billion in August, signaling a stronger economy.

The Dow Jones Industrial Average fell 0.27 percent this week, best among the major indexes. Weakness was concentrated in technology and pulled the Nasdaq down 2.30 percent. SPDR Consumer Staples (XLP) rallied 1.06 percent and SPDR Utilities (XLU) 0.74 percent. SPDR Industrials (XLI) gained 0.70 percent on the week. The Dow Transportation Index gained 0.33 percent.

SPDR Communications Services (XLC) fell 4.01 percent and SPDR Technology (XLK) declined 2.59 percent.

The U.S. Dollar Index climbed 0.8 percent on the week on strong economic data and weakness abroad. SPDR S&P 500 (SPY) fell 0.93 percent versus losses of 3.61 and 3.26 percent for iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM).

EEM just missed closing at a new 52-week low on Friday following political violence in Brazil. The leading presidential candidate was stabbed late Thursday but remains stable following surgery. His economic policies have bolstered Brazilian stocks and currency.

Crude oil declined about 3 percent on the week and copper 3.5 percent. Agricultural commodities climbed 1.5 percent.

President Trump has threatened additional tariffs on $200 billion of Chinese goods and tariffs on an additional $267 billion of Chinese imports could follow. iShares China Large Cap (FXI) moved in sympathy with emerging markets and lost 3.29 percent on the week.

Earnings news was light this week. Broadcom (AVGO) beat estimates and shares rallied 7.7 percent on Friday. Drone maker AeroVironment (AVAV) gained 16.7 percent for the week following its strong report.

The Nasdaq led the major indexes this week with an increase of 2.06 percent. SPDR Technology (XLK) returned 1.74 and SPDR Consumer Discretionary (XLY) 1.78 percent with Amazon’s (AMZN) 5.68-percent gain. The stock closed above $2000 for the first time on Thursday and moved higher still on Friday. Amazon is less than 2 percent away from joining Apple (AAPL) at a $1 trillion market capitalization.

Smaller indexes underperformed on the week, with only SPDR Materials (XLB) and iShares U.S. Telecom (IYZ) gaining ground. Energy, utilities and consumer staples declined. Coca-Cola (KO) weighed on staples with the acquisition of Costas coffee chain for $5 billion. The move will put the company in direct competition with Starbucks (SBUX). SPDR Healthcare (XLV) rose 0.97 percent, iShares Nasdaq Biotechnology (IBB) 4.08 percent, iShares U.S. Medical Devices (IHI) 2.33 percent, and SPDR S&P Pharmaceuticals (XPH) 2.27 percent.

The U.S. Dollar Index was flat on the week but gained against emerging-market currencies. The Argentine peso tumbled even after the central bank raised interest rates by 15 percentage points. The Turkish lira also fell again. Indonesia’s rupiah fell to a new multi-year low on Friday. The Brazilian real, however, rallied on Friday ahead of the Supreme Court’s decision on jailed former President Lula expected late on Friday. Their decision could determine whether emerging markets rebound or slump at the start of next week.

SPDR S&P 500 (SPY) increased 1.05 percent on the week. iShares MSCI EAF (EFA) gained only 0.04 percent and iShares MSCI Emerging Markets (EEM) fell 0.46 percent. China was largely responsible for the drop in emerging markets.

Consumer confidence popped in the Conference Board Survey and beat expectations in the University of Michigan survey. The former number was the best since October 2000. The latter was better than expected, but below July’s reading. The University of Michigan survey registered more concern about inflation and trade, but otherwise matched much of the optimism in the Conference Board’s results.

Personal income and consumer spending rose 0.3 and 0.4 percent in July according to the BEA. Core PCE inflation was 0.2 percent, ahead of expectations. The 12-month core PCE has risen 1.98 percent, the highest result since 2.04 percent in April 2012.

Retail earnings were mixed this week. Tiffany & Co. (TIF) beat earnings, but shares were punished due to rising costs. Dollar Tree (DLTR) and Big Lots (BIG) missed and shares tumbled. Best Buy (BBY) and lululemon (LULU), however, solidly beat expectations on Friday. SPDR S&P Retail (XRT) gained 0.33 percent on the week.

The Nasdaq climbed above 8000 to another record high on Monday amid a broad rally in stocks. The S&P 500 Index and Russell 2000 Index also closed at new all-time highs. The Dow closed at its highest level since February 2, and just 2 percent from its all-time high. Materials, financials and industrials were the strongest sectors.

SPDR Materials (XLB) advanced 1.35 percent on Monday. DowDuPont (DWDP) gained 2.33 percent. Fertilizer stocks also performed well, led by a 3.31-percent increase in Mosaic (MOS).

A trade deal with Mexico boosted transportation stocks. Railroad Kansas City Southern (KSU) gained 4.68 percent and iShares Transportation Average (IYT) returned 1.11 percent. SPDR Industrials (XLI) rallied 1.20 percent.

Brokerages and investment banks lifted the financial sector. iShares U.S. Broker-Dealers (IAI) climbed 1.40 percent. SPDR Financial (XLF) rose 1.24 percent to trade at its highest level since mid-March.

This week will be relatively light on economic reports. The GDP revision will be out on Wednesday. Economists expect second-quarter GDP growth will be lowered 0.1 percentage points to 4.0 percent. August consumer confidence, July pending home sales and July PCE core inflation are also on tap.

The U.S. Dollar Index weakened by 0.4 percent, the seventh dip in the past eight days. Crude oil rallied towards $69 a barrel on Monday. Foreign shares also outperformed with iShares MSCI EAFE (EFA) climbing 1.38 percent and iShares MSCI Emerging Markets (EEM) rising 1.36 percent.

The 10-year Treasury yield moved higher on Monday, but at 2.85 percent remains near its six-month lows. Odds of a September rate hike hit 99.2 percent.

Retail earnings season winds down this week, but there are still several large chains reporting. Among them are Best Buy (BBY), Tiffany & Co. (TIF), BJ’s Wholesale (BJ), American Eagle (AEO), Dick’s Sporting Goods (DKS), Guess (GES), Chico’s FAS (CHS), Dollar General (DG), Dollar Tree (DLTR), lululemon (LULU), Ulta Beauty (ULTA), Burlington Stores (BURL), Michaels Companies (MIK) and Big Lots (BIG).

Also reporting this week are Salesforce.com (CRM), Brown Forman (BF), Eaton Vance (EV), H&R Block (HRB), Hewlett Packard Enterprise (HPE) and Campbell Soup (CPB).