Market Perspective for August 18, 2018

The Dow Jones Industrial Average gained 1.41 percent on the week, doubling the 0.59 percent return of the S&P 500 Index. Wal-Mart (WMT) delivered strong earnings, the fastest same-store sales growth in a decade, and 40 percent growth in online sales. Wal-Mart gained nearly 9 percent on the week. The Chinese trade delegation announced plans on Friday to lay out the framework for a larger deal when President Trump and President Xi meet in November.

SPDR Consumer Staples (XLP) increased 3.34 percent this week, SPDR Healthcare (XLV) 1.66 percent, SPDR Industrials (XLI) 1.60 percent and SPDR Financials (XLF) 0.68 percent. In contrast to value stocks, the technology sector was relatively weak. SPDR Technology (XLK) gained 0.19 percent. Invesco QQQ (QQQ) fell 0.34 percent.

The National Federation of Independent Business small business confidence index climbed to the second-highest level in history last month, barely missing the all-time high set in 1983. Retail sales jumped 0.5 percent in July and 0.6 ex-autos, trouncing expectations. Productivity increased 2.9 percent in the second quarter and unit labor costs fell 0.9 percent.

The August National Association of Homebuilders confidence index fell to 67, but that number is still consistent with a booming housing market. Housing start and permits were 1.17 and 1.31 million in July.

Crude oil prices slumped this week on emerging market weakness and surprisingly large inventory increases. Analysts were looking for a 2.4 million barrel decline in crude inventory, but the government reported a 6.8 million barrel increase. West Texas Intermediate crude closed the week at $65.88 per barrel.

The U.S. dollar declined slightly this week as emerging market fears faded. iShares MSCI Emerging Markets (EEM) was down more than 4 percent midweek, but it finished with a loss of 2.27 percent. iShares MSCI EAFE (EFA) dipped 0.52 percent. SPDR S&P 500 (SPY) gained 0.64 percent. iShares MSCI Turkey (TUR), rallied back from an 11 percent lose and ended the week with a small decline of 0.70 percent.

In addition to Wal-Mart (WMT), Home Depot (HD) reported $3.05 per share in earnings versus $2.84 expected. Nvidia (NVDA), however, suffered as cryptocurrency prices collapsed. Cryptocurrency miners have gravitated to Nvidia’s chips over the past year, but the company gave weaker-than-expected forward guidance as it anticipates a significant drop in demand.


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