Market Perspective for August 25, 2017

Equities rallied this week following substantial gains on Monday and Tuesday. The Nasdaq gained 1.45 percent and SPDR Technology (XLK) 1.03 percent on the week. SPDR Healthcare (XLV) returned 1.21 percent and iShares Nasdaq Biotechnology (IBB) increased 2.26 percent. The Russell 2000 rallied 1.45 percent to lead index performance.

Federal Reserve Chair Janet Yellen’s Friday morning speech at the Jackson Hole symposium focused on financial stability and regulation, but was less hawkish on interest rates than many had anticipated. The 10-year Treasury yield and U.S. dollar declined on Friday as traders repositioned in response to Yellen’s comments. odds of a December rate hike, however, jumped from 33 percent to 40 percent.

Manufacturing and service sector flash PMIs both reflected expansion. Manufacturing was slightly lower than in July, while the service sector reading was much higher. The official number will be out next week.

New home sales were slower than expected in July at an annual pace of 571,000, below June’s 630,000. Existing home sales also declined to an annual pace of 5.44 million, slightly below forecasts. The dip in home sales reduced the Atlanta Fed’s GDP Now estimate of third-quarter growth to 3.4 percent. The consensus forecast remained unchanged at 2.7 percent.

Durable goods orders fell 6.8 percent in July, but beat expectations by 0.1 percent. Capital goods orders climbed 0.4 percent, up from June’s flat growth.

U.S. oil production (ex-Alaska) rose to its highest level since July 2015. Energy shares ended up on the week. SPDR Energy (XLE) gained 1.09 percent.

Amazon’s (AMZN) plan to cut prices at Whole Foods (WFM) sent competitors’ shares lower. Wal-Mart (WMT) and Costco (COST) fell, though grocers were by far the hardest hit. Kroger (KR) shares lost 8 percent over the course of an hour. Brick-and-mortar retail, however, rebounded on the week. SPDR S&P Retail (XRT) rallied 3.66 percent.

Shares of Medtronic (MDT) fell after the firm beat earnings, but missed revenue. iShares U.S. Medical Devices (IHI) dipped only 0.28 percent nonetheless as the broader healthcare sector advanced. Brothers (TOL) similarly beat earnings, but provided weaker guidance. iShares U.S. Home Construction (ITB) slipped 0.33 percent on the week.

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