Year: 2018

The S&P 500 Index was flat this week but led the major indexes. Earnings season and a potential breakthrough in North and South Korea relations boosted stocks.

First-quarter GDP growth was 2.3 percent according to the Bureau of Economic Analysis’ first estimate, better than the final consensus estimate of 2.0 percent. Lower personal consumption weighed on GDP growth. Wages and salaries increased 0.9 percent in the quarter, up from 0.6 percent in the prior quarter. This was the fastest quarterly wage growth in nearly 10 years.

Earnings growth for S&P 500 Index companies jumped from 18.3 percent last week to 23.2 percent this week as many companies smashed earning expectations. A healthy portion of the stronger earnings came from one-time tax gains as the tax cuts took effect in the first quarter. Energy earnings have risen 89.1 percent, technology 31.8 percent, financials 26.5 percent, industrials 23.5 percent.

Amazon (AMZN) highlighted the earnings strength in the technology sector. All of its major business segments reported stronger-than-expected earnings and faster than expected revenue growth. The company also raised guidance. Shares rallied more than 10 percent from the weekly low to the post-earnings high on Friday. SPDR Technology (XLK) fell 0.36 percent on the week. Amazon climbed 2.94 percent and lifted SPDR Consumer Discretionary (XLY) 1.10 percent.

Caterpillar (CAT) reported a strong first quarter and shares rallied. Then in the conference call with analysts, management said this might be the peak in earnings for 2018. Shares initially rallied on the positive earnings report, but then fell as much as 10 percent from those highs following the conference call.

Healthcare was the best performing of the large sectors this week. SPDR Healthcare (XLV) advanced 1.94 percent. Large-cap holdings in the fund such as AbbVie (ABBV), UnitedHealth Group (UNH) and Amgen (AMGN) drove results. All three delivered strong earnings report this week.

The 10-year Treasury yield cracked 3 percent this week, but it didn’t hit 3.05, the level being watched by many traders. The 10-year yield finished the week at 2.96 percent. Even though higher interest rates are bad news for real estate and utilities, they were two of the best performing sectors this week. SPDR Utilities (XLU) and SPDR Real Estate (XLRE) returned 2.72 and 2.61 percent, respectively.

Crude oil traded above $69 a barrel this week before ending at $68 and change. A bump in oil inventory surprised the market and kept crude from hitting $70 this week. SPDR Energy (XLE) was one of the better performing sector ETFs this week. It gained 0.63 percent.

The U.S. Dollar Index rallied 1.5 percent this week and broke out of a downtrend that stretches back to the end of 2016. The index also enjoyed its strongest two-week rally in the past year. Dollar strength didn’t affect international stock performance this week though. SPDR S&P 500 Index (SPY) gained 0.06 percent. iShares MSCI EAFE (EFA) fell 0.10 percent and iShares MSCI Emerging Markets (EEM) added 0.02 percent.

Stocks opened the week mixed. The flash manufacturing and services PMIs strengthened in April. The Markit manufacturing PMI is at its highest in three years. Existing home sales in March were stronger than expected.

Rising interest rates kept a lid on stocks after the 10-year Treasury yield hit 2.99 percent at noon before pulling back. Financials benefited from higher rates, and banks were among the better performing subsectors on the day.

First-quarter GDP growth will headline the week’s economic data. The New York Fed’s Nowcast model is far more optimistic at 2.9 percent growth as of April 20.

April consumer confidence will also be released this week. Economists forecast a slight decline from March. They see a slight rise in the University of Michigan’s consumer sentiment survey out later in the week. New home sales are expected to have hit an annualized pace of 630,000 in March.

The U.S. Dollar Index and the Bloomberg Dollar Index broke out of downtrends on Monday. Both peaked in December 2016 and have steadily declined as the dollar weakened against the euro, yen and emerging-market currencies.

North Korea will freeze nuclear and missile tests as a prelude to negotiations with the United States. China and the United States both spoke positively about a resumption in trade negotiations.

Major technology companies and Dow components will  report earnings this week, including Alphabet (GOOGL), Verizon (VZ), 3M (MMM), Coca-Cola (KO), SAP (SAP), Lockheed Martin (LMT), United Technologies (UTX), Texas Instruments (TXN), Caterpillar (CAT), Eli Lilly (LLY), Facebook (FB), Visa (V), AT&T (T), Boeing (BA), Comcast (CMCSA), PayPal (PYPL), Amazon (AMZN), Microsoft (MSFT), Intel (INTC), Royal Dutch Shell (RDS.A), AbbVie (ABBV), Pepsi (PEP) and Amgen (AMGN).

Halliburton (HAL), Chubb (CB), Biogen (BIIB), Travelers Companies (TRV), Sherwin-Williams (SHW), Advanced Micro Devices (AMD), Qualcomm (QCOM), Aflac (AFL), General Dynamics (GD), GlaxoSmithKline (GSK), Northrop Grumman (NOC), Baidu (BIDU), Altria (MO), Union Pacific (UNP), United Parcel Service (UPS), Bristol-Myers (BMY), Starbucks (SBUX), Raytheon (RTN), ConocoPhillips (COP), Time Warner (TWX), Exxon Mobil (XOM) and Chevron (CVX) are also scheduled to report this week.

Energy, industrials, consumer discretionary and financials were the strongest sectors this week. SPDR Energy (XLE) led with an increase of 2.65 percent after oil prices climbed above $68 a barrel during the week. SPDR S&P Oil & Gas Exploration & Production (XOP) increased 3.72 percent. SPDR Financial (XLF) advanced 1.75 percent. Alcoa (AA) rallied strongly on rising aluminum prices and its earnings beat. The small-cap Russell 2000 Index led the major indexes with an increase of 0.94 percent.

Netflix (NFLX) and Amazon (AMZN) lifted the consumer discretionary sector this week. Netflix beat earnings estimates and gained 5.10 percent on the week. Amazon CEO Jeff Bezos revealed that Amazon now has 100 million Prime subscribers generating $10 billion in revenue each year. Shares rose 6.73 percent. SPDR Consumer Discretionary (XLY) gained 1.72 percent.

The blended earnings growth rate (reported earnings and remaining forecasts) keeps rising as companies beat on earnings and revenue, but a few companies did not meet investors’ expectations. Philip Morris International (PM) fell 17.19 percent on the week after Thursday’s earnings report. It beat earnings, but growth of new products missed expectations. Proctor & Gamble (PG) fell 4.71 percent. Slow growth and rising costs are hurting P&G with much of the consumer staples sector. SPDR Consumer Staples (XLP) fell 4.01 percent on the week.

Taiwan Semiconductor (TSM) slumped 8.66 percent on the week following a miss on earnings and revenue forecasts and neutral guidance. iShares Semiconductor (SOXX) declined 4.48 percent. International Business Machines (IBM) beat earnings, but disappointed investors. It slid 7.51 percent on the week. SPDR Technology (XLK) declined 0.18 percent.

General Electric (GE) investors responded positively to its earnings report, sending shares up 7.78 percent on the week.

Economic data was strong this week. March retail sales, housing starts, building permits, industrial production, and capacity utilization all reported better-than-expected data. Homebuilder confidence eased in April but remained near two-decade highs. Initial claims for unemployment were 232,000, still near four-decade lows.

The 10-year Treasury yield rallied to a new 52-week high on Friday to finish at 2.95 percent. The 30-year Treasury yield hit 3.14 percent. SPDR Utilities (XLU) rallied early in the week and finished with a gain of 1.04 percent.

Rising interest rates accompanied a rally in the U.S. Dollar Index. iShares MSCI EAFE Index (EFA) gained 0.34 percent, SPDR S&P 500 (SPY) 0.64 percent. Weakness was concentrated in emerging markets. iShares MSCI Emerging Markets (EEM) fell 0.74 percent.

Amazon (AMZN) said it was shelving its pharmacy plans for now. It had obtained a pharmacy license last year and many pharmacy stocks underperformed as a result. This week those shares outperformed. iShares U.S. Healthcare Providers (IHF) gained 2.43 percent. SPDR Healthcare (XLV) rose 0.28 percent on the week.