Market Perspective for August 31, 2018

The Nasdaq led the major indexes this week with an increase of 2.06 percent. SPDR Technology (XLK) returned 1.74 and SPDR Consumer Discretionary (XLY) 1.78 percent with Amazon’s (AMZN) 5.68-percent gain. The stock closed above $2000 for the first time on Thursday and moved higher still on Friday. Amazon is less than 2 percent away from joining Apple (AAPL) at a $1 trillion market capitalization.

Smaller indexes underperformed on the week, with only SPDR Materials (XLB) and iShares U.S. Telecom (IYZ) gaining ground. Energy, utilities and consumer staples declined. Coca-Cola (KO) weighed on staples with the acquisition of Costas coffee chain for $5 billion. The move will put the company in direct competition with Starbucks (SBUX). SPDR Healthcare (XLV) rose 0.97 percent, iShares Nasdaq Biotechnology (IBB) 4.08 percent, iShares U.S. Medical Devices (IHI) 2.33 percent, and SPDR S&P Pharmaceuticals (XPH) 2.27 percent.

The U.S. Dollar Index was flat on the week but gained against emerging-market currencies. The Argentine peso tumbled even after the central bank raised interest rates by 15 percentage points. The Turkish lira also fell again. Indonesia’s rupiah fell to a new multi-year low on Friday. The Brazilian real, however, rallied on Friday ahead of the Supreme Court’s decision on jailed former President Lula expected late on Friday. Their decision could determine whether emerging markets rebound or slump at the start of next week.

SPDR S&P 500 (SPY) increased 1.05 percent on the week. iShares MSCI EAF (EFA) gained only 0.04 percent and iShares MSCI Emerging Markets (EEM) fell 0.46 percent. China was largely responsible for the drop in emerging markets.

Consumer confidence popped in the Conference Board Survey and beat expectations in the University of Michigan survey. The former number was the best since October 2000. The latter was better than expected, but below July’s reading. The University of Michigan survey registered more concern about inflation and trade, but otherwise matched much of the optimism in the Conference Board’s results.

Personal income and consumer spending rose 0.3 and 0.4 percent in July according to the BEA. Core PCE inflation was 0.2 percent, ahead of expectations. The 12-month core PCE has risen 1.98 percent, the highest result since 2.04 percent in April 2012.

Retail earnings were mixed this week. Tiffany & Co. (TIF) beat earnings, but shares were punished due to rising costs. Dollar Tree (DLTR) and Big Lots (BIG) missed and shares tumbled. Best Buy (BBY) and lululemon (LULU), however, solidly beat expectations on Friday. SPDR S&P Retail (XRT) gained 0.33 percent on the week.

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