Month: May 2019

The broad market rally in 2019 finally ran into some resistance this week. The S&P 500 Index and Dow Jones Industrial Average declined 2.2 and 2.1 percent, respectively.  iShares MSCI Emerging Markets (EEM) slumped 5.0 percent as Chinese shares sold off.

Nevertheless, economic fundamentals remain strong and earnings season continues to impress. We have been expecting a sector rotation; investors this week sold off technology stocks more than healthcare and financials positions, an inversion of relative sector performance this year.

SPDR Technology (XLK) slipped 3.37 percent, while SPDR Healthcare (XLV) and SPDR Financials (XLF) declined only 1.39 percent and 2.10 percent, respectively. The more defensive SPDR Utilities (XLU) lost only 0.58 percent and SDPR Consumer Staples (XLP) fell 0.17 percent.

iShares Edge MSCI Min Vol USA (USMV) outperformed this week, retreating only 0.47 percent. USMV has been an outperformer over the past year thanks to outperforming during corrections.  Vanguard Dividend Appreciation (VIG) also beat the market, sliding 1.27 percent.

The possibility of a trade deal with China has investors nervous, resulting in the sell-off this week. After China sent back a draft proposal with most of the trade enforcement mechanisms, particularly regarding intellectual property, stripped out, negotiations hit a roadblock.   If China’s move was a gambit, we could see a trade deal resolution relatively quickly.

Economic data remains strong. The Job Openings and Labor Turnover Survey showed 7.5 million openings in March. Weekly jobless claims held near four-decade lows at 228,000. Although it doesn’t have a significant impact on our economy, Canada reported an incredible jobs number that adjusted for population would be approximately 900,000 jobs in the United States.

Crude oil was down a modest 0.37 percent and traded in a tight range for the week. SPDR Energy (XLE) declined 0.40 percent thanks to crude’s stability.

Disney (DIS) and McKesson (MCK) outperformed this week thanks to solid earnings reports. Disney (DIS) matched year-ago earnings of $1.84 per share, but analysts expected a dip to $1.58 per share. McKesson (MCK) rallied as much as 9 percent midweek following its earnings beat. The entire healthcare provider sector has been under pressure but, the solid results alleviated some investor concerns.

Producer and consumer inflation will headline a light week of economic data. Economists forecast producer prices will have increased 0.2 percent in April. They predict consumer prices rose 0.4 percent and core CPI climbed 0.2 percent.

The Job Openings and Labor Turnover Survey (JOLTS) report for March will be released. The last report showed 7.1 million job openings.

Uber (UBER) is expected to go public this Thursday, just after its competitor Lyft reports earnings. Aside from the IPO and earnings news, drivers for both companies are planning a multi-city strike on Wednesday over pay concerns. Drivers plan to log off the rideshare apps during rush hour.

Crude oil lost more than $5 per barrel from its peak a few weeks ago. Relative to the S&P 500 Index, SPDR Energy (XLE) is near its December 2018 low and trading at its cheapest level in nearly 20 years. XLE has risen 12.91 percent this year through Friday. SPDR S&P 500 (SPY) has climbed 18.17 percent.

Berkshire Hathaway (BRK/A) reported earnings on May 4th and beat analyst expectations. The firm reported earnings of $5.55 billion, ahead of the $5.29 billion reported for the first quarter in 2018. However, Berkshire owns 27 percent of Kraft Heinz (KHC) and that firm hasn’t filed its 10-K yet. Earnings could be adjusted once the Kraft Heinz 10-K is filed.

Occidental Petroleum (OXY), American International Group (AIG), Pioneer Natural Resources (PXD), Tyson Foods (TSN), Sysco (SYY), KLA-Tencor (KLAC) and Mosaic (MOS) are among the companies kicking off earnings news this week.

Electronic Arts (ERTS), Lyft (LYFT), Regeneron Pharmaceuticals (REGN), Allegan (AGN), Emerson Electric (EMR), Diamondback Energy (FANG), Wynn Resorts (WYNN), Sprint (S) and Petrobras (PBR) report on Tuesday.

On Wednesday, investors will hear from Disney (DIS), Coty (COTY), Marathon Petroleum (MPC), Roku (ROKU), Kraft Heinz (KHC), McKesson (MCK), Twenty-First Century Fox (FOXA), Randgold Resources (RAND) and Microchip Technology (MCHP).

Thursday brings Booking Holdings (BKNG), Trade Desk (TTD), Duke Energy (DUK), Vale SA (VALE), Becton Dickson (BDX), Cardinal Health (CAH) and Symantec (SYMC).

The week concludes with earnings from JD.com (JD), Marriot International (MAR), Viacom (VIAB) and Enbridge (ENB).

Stocks moved sharply higher on Friday following excellent April employment data. For the week, the Russell 2000 Index gained 1.40 percent to lead the major indexes. The Nasdaq finished with an increase of 0.22 percent after being down 2 percent for the week on Thursday. The S&P 500 Index rallied 0.20 percent, while the Dow Jones Industrial Average slipped 0.14 percent.

SPDR Financials returned 1.32 percent on the week, SPDR Healthcare (XLV) 1.29 percent and SPDR Industrials (XLI) 1.14 percent. SPDR S&P Regional Banking (KRE) advanced 2.39 percent, VanEck Semiconductors (SMH) 1.47 percent, and iShares U.S. Aerospace & Defense (ITA) 1.07 percent.

The economy created 263,000 new jobs in April, resulting in the unemployment rate falling to 3.6 percent. Wage growth was on target at 0.2 percent for the month. The ADP employment report out earlier in the work was similarly strong; it showed private employers hired 275,000 new workers.

Consumer confidence increased in April according to the Conference Board’s index. Manufacturing PMIs show the economy was in a comfortable expansion last month. Motor vehicle sales slowed to a 16.4 million annualized pace in April, but inside the sales range of the past 5 years.

Crude oil continues to decline. It traded near $67 a week ago but closed at $61.94 on Friday. SPDR Energy (XLE) fell 3.07 percent for the week.

The U.S. Dollar Index slid 0.6 percent as the rebound in European economic activity lifted the euro. The dip in the greenback helped foreign markets outperform. iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) increased 0.81 percent.

Earnings were also strong. Apple (AAPL) beat earnings and raised guidance. Shares climbed 3.66 percent. Pharma giants Merck (MRK) and Pfizer (PFE) rallied 4.40 percent and 3.55 percent, respectively, after solid reports. Qualcomm (QCOM), Advance Micro Devices (AMD) and Mastercard (MA) were among other companies that delivered positive results.