Month: September 2019

The Russell 2000 Index rallied 0.41 percent after a shock to the oil market accelerated the rotation into value shares and accelerated the short-squeeze in the energy market. The other major indexes slipped on the day, with the S&P 500 Index losing 0.31 percent.

SPDR Energy (XLE) advanced 3.36 percent on Monday, SPDR Real Estate (XLRE) 1.04 percent and SPDR Utilities (XLU) 0.08 percent. SPDR S&P Oil & Gas Exploration & Production (XOP) rose 10.80 percent.

Crude oil spiked to $62.90 after Saudi Arabia’s oil production was attacked Saturday morning. It was still unclear if rebels in Yemen hit the facilities with a drone attack or if as later reported, cruise missiles were fired from Iranian territory. The $8 increase per barrel of oil will translate into about a 10-cent increase at the pump.

The Federal Reserve meets this week, with a rate announcement on Wednesday. The odds of a cut have been tumbling with strong economic data, stocks near all-time highs and now an oil shock that will boost consumer and producer price inflation.

Housing starts, building permits and existing home sales for August are also out this week. Economists expect a pickup in housing starts, but lower permits and sales data. The homebuilders’ confidence index for September is due on Tuesday.

Chinese economic data was relatively weak in August, led by a slowdown in industrial production growth and slower-than-expected lending growth.

The U.S. Dollar Index rallied 0.4 percent on Monday. Surging U.S. oil and gas production insulates the U.S. from shocks as we are less dependent upon Saudi imports. China and Europe are more vulnerable to Middle East supplies. iShares MSCI EAFE (EFA) declined 0.88 percent on Monday and iShares MSCI Emerging Markets (EEM) slid 0.79 percent.

Fed Ex (FDX) will release their earnings report on Tuesday. Analysts forecast earnings of $3.20 per share on revenues of $8.9 billion. Fed Ex earnings are always closely followed, but investors will also be tuning in this week to hear how the jump in oil prices could affect the transportation sector.

The Russell 2000 Index rallied 4.85 percent this week, while the Dow Jones Industrial Average managed a 1.56 percent advance. The S&P 500 Index and Nasdaq increased 0.92 percent and 0.86 percent, respectively. The S&P 500 Index and DJIA both are close to all-time highs.

SPDR Financials rallied 3.86 percent as rising yields boosted the banking sector. SPDR S&P Regional Banking (KRE) climbed 8.12 percent.

SPDR Energy (XLE) and SPDR Materials (XLB) rose 3.43 percent and 3.32 percent. VanEck Steel (SLX) jumped 9.43 percent, SPDR S&P Oil & Gas Services (XES) 7.70 percent, SPDR S&P Oil & Gas Exploration & Production (XOP) 5.68 percent and VanEck Coal (KOL) 3.83 percent.

Economic data was strong. Job openings remained at 7.2 million, still more than the number of unemployed Americans. Initial jobless claims fell to 204,000.

Retail sales grew 0.4 percent in August, faster than economists predicted. The University of Michigan’s advance consumer sentiment reading for September increased to 92, beating expectations. Business inventories grew 0.4 percent in July, a positive sign for third quarter GDP. The Atlanta Federal Reserve’s GDP Now model increased its third quarter GDP forecast to 1.8 percent this week.

Emerging markets rallied. iShares MSCI Emerging Markets returned 2.41 percent for the week, while iShares MSCI EAFE (EFA) gained 2.12 percent iShares Barclays 20+ Year Treasury (TLT) slid 6.32 percent for the week.

Crude oil fell to $54.85 after OPEC voted against further production cuts. Many energy stocks rallied strongly this week as energy shorts were squeezed. SPDR S&P Oil Services (XES) and Explorers (XOP) cut their losses but are still down 8.81 percent and 11.20 percent this year.

Kroger (KR) and Broadcom (AVGO) both beat earnings estimates, while Oracle (ORCL) matched forecasts.