Month: May 2020

Equities jumped higher overnight after Federal Reserve Chairman Jerome Powell told 60 Minutes that it could do more to boost the markets. When asked by reporter Scott Pelley, “Has the Fed done all it can do?” Powell answered: “There’s a lot more we can do. We’re not out of ammunition by a long shot. There’s really no limit to what we can do with these lending programs that we have.” Also boosting shares were reports of early success in vaccine trials for coronavirus.

Small-cap and value shares benefited most from the positive news. The Russell 2000 Index gained 6.10 percent. Vanguard Value (VTV) climbed 3.89 percent and Vanguard Growth (VUG) added 2.28 percent. The Dow Jones Industrial Average increased 3.85 percent, the S&P 500 Index 3.15 percent and the Nasdaq 2.44 percent.

SPDR Energy (XLE) advanced 8.17 percent on the day, boosted by an 11 percent increase in West Texas Intermediate crude oil. SPDR Industrials (XLI) rose 6.59 percent and SPDR Financials (XLF) 5.13 percent.

The National Association of Homebuilders reported an uptick in homebuilder optimism in May. Their index slid to 30 in April amid the closed economy, but it rebounded to 37 this month. Tuesday brings housing starts and building permits for April and Thursday brings existing home sales.

Economists expect initial claims for unemployment fell to 2.35 million last week. Flash manufacturing and service PMIs for many economies will be out on Thursday. Investors will be looking for a rebound from April lows.

Finally, the minutes from last month’s Federal Reserve meeting will be released on Wednesday.

The U.S. Dollar Index declined 0.80 percent on Monday as “risk-on” trades dominated. The dollar fell nearly 1 percent versus the euro, but it has a small gain versus the yen. iShares MSCI EAFE (EFA) increased 4.04 percent and iShares MSCI Emerging Markets (EEM) climbed 3.91 percent.

The 10-year Treasury yield climbed to 0.74 percent on Monday, the highest close since mid-April. iShares 20+ Year Treasury (TLT) declined 2.20 percent. High yield and corporate bonds rallied as investors priced in the reopening of the U.S. economy. iShares iBoxx High Yield Corporate Bond (HYG) climbed 1.77 percent, Invesco Senior Loan (BKLN) 0.87 percent and Fidelity Corporate Bond (FCOR) 0.30 percent.

 Retail earnings reports will dominate the week. Investors will hear from Home Depot (HD), Lowe’s (LOW), Wal-Mart (WMT), Kohl’s (KSS), Urban Outfitters (URBN), Target (TGT) and TJX Companies (TJX) among.

Chinese companies also report this week. On tap are Weibo (WB), Alibaba (BABA) and Autohome (ATHM).

Other companies reporting are Medtronic (MDT), Nvidia (NVDA), Expedia (EXPE), Palo Alto Networks (PANW), Deere (DE), Campbell’s Soup (CPB) and Intuit (INTU).

The Nasdaq decreased 1.14 percent this week, the S&P 500 Index 2.22 percent and the Dow Jones Industrial Average 2.62 percent. SPDR Healthcare (XLV) advanced 0.98 percent as biotechnology and pharmaceutical shares extended their rallies. iShares Nasdaq Biotechnology (IBB) climbed 3.16 percent and SPDR S&P Pharma (XPH) rose 2.46 percent.

The National Federation of Independent Business’ small-business confidence index dipped to 90.9 in April from 96.4 in March. The result was much better than expected, indicating many small businesses are optimistic about the future.

As expected, consumer and producer prices tumbled in April. The headline consumer price index slid 0.8 percent for the month. Core CPI dipped 0.4 percent. Producer prices slumped 1.3 percent.

Initial jobless claims were 2.98 million for the week ending May 9, down slightly from the prior week’s 3.18 million.

Retail sales declined 16.4 percent in April. Sales ex-autos fell 17.2 percent. Non-essential physical retail suffered the largest declines, with clothing store sales down 79 percent. Grocery sales dipped 13 percent. Home supply stores only decreased 3.5 percent. Online sales rose 8.4 percent.

Consumer sentiment showed a surprising increase in May. Analysts expected sentiment would drop from April, but the University of Michigan’s advance survey for May showed consumer confidence rose from 71.8 to 73.7 over the first part of the month.

The U.S. Dollar Index remained strong, gaining 0.5 percent on the week. iShares MSCI Emerging Markets (EEM) decreased 2.25 percent and iShares MSCI EAFE (EFA) fell 2.85 percent. The war of words between China and the United States escalated. iShares China Large-Cap (FXI) declined 2.79 percent.

A number of states began opening their economies this week. The initial data shows pent up demand for services. Most companies are opening with social distancing rules, reducing supply. This could generate many stories of “sold out” openings. A booking agency for Carnival cruises said August demand was about double from last year. Shanghai Disneyland sold out at its open and bookings are sold out for future dates. A casino in Oklahoma did a soft opening ahead of its return to normal business. There were hundreds of people lined up. Drive-in theaters are seeing a surge in popularity as well.

The Nasdaq extended its winning streak with an increase of 0.78 percent on Monday. It has risen 2.45 percent in 2020, while the S&P 500 Index remains down 9.30 percent.

Healthcare was the best performing sector of the day climbing 1.72 percent. SPDR Technology (XLK) rose 0.66 percent. Biotechnology powered the healthcare sector. iShares Nasdaq Biotechnology (IBB) rallied 4.28 percent. SPDR S&P Biotech (XBI) popped 4.77 percent. While SPDR S&P Pharma (XPH) added 3.83 percent.

The National Federation of Independent Businesses (NFIB) will publish its small-business confidence index for April on Tuesday. Wednesday brings the producer price index. Economists see a 0.5 percent drop. On Friday, April retail sales will be reported. Analysts forecast a decline of 12.3 percent and 9.0 percent ex-autos.

Earnings season is starting to wind down. Among the large-caps reporting this week are Duke Energy (DUK), Toyota (TM), Cisco (CSCO), Norwegian Cruise Line (NCLH), Applied Materials (AMAT) and Brookfield Asset Management (BAM).

Carnival Cruise Lines (CCL) reported on Monday. It said bookings increased 600 percent after announcing it would sail again on August 1st.

Bond yields extended their rise on Monday with the 10-year yield closing at 0.73 percent, the highest since mid-April. iShares iBoxx High Yield Corporate Bond (HYG) fell 0.45 percent.

The U.S. Dollar Index rose 0.37 percent on Monday, powered by strong gains versus the yen. iShares MSCI EAFE fell 0.09 percent and iShares MSCI Emerging Markets (EEM) slid 0.65 percent.

West Texas Intermediate crude oil slipped $1.09 per barrel on Monday bringing the per barrel price to $25.08. SPDR Energy (XLE) dipped 1.75 percent.