Market Perspective for December 20, 2019

Equities extended their rally as economic data shows the economy still strengthening. The Nasdaq rallied 2.14 percent, the S&P 500 Index 1.64 percent and the Dow Jones Industrial Average 1.14 percent.

SPDR Communication Services (XLC) rose 2.59 percent this week. SPDR Utilities (XLU) shrugged off rising interest rates and climbed 1.89 percent. SPDR Healthcare (XLV) extended its rally with a return of 1.86 percent. The pharmaceutical subsector powered the move. iShares U.S. Pharmaceuticals (IHE) advanced 3.62 percent and the small-cap leaning SPDR S&P Pharmaceuticals (XPH) popped 8.12 percent.

The flash manufacturing and services PMIs show the U.S. economy continues to expand in December. PMI readings in Europe show the economy struggling, though modestly improving.

The National Association of Homebuilder’s confidence index spiked to a 20-year high in December. Falling interest rates and strong demand for new homes has builders optimistic. Housing starts and building permits both increased from October and beat forecasts. iShares U.S. Home Construction (ITB) slipped 0.78 percent on the week, but it has rallied more than 20 percent since August.

The 10-year treasury yield hit 1.965 percent this week before setting at 1.92 percent on Friday. iShares 20+ Year Treasury (TLT) fell 1.56 percent. Higher-yielding bonds rallied on the strong economy and falling credit risk. Invesco Senior Loan (BKLN) increased 0.48 percent and iShares iBoxx High Yield Corporate Bond (HYG) 0.46 percent.

iShares MSCI Emerging Markets (EEM) advanced 2.57 percent on the week, well ahead of the 0.47-percent gain for iShares MSCI EAFE (EFA). iShares China Large Cap (FXI) gained 5.07 percent as the trade deal comes at a critical time for the Chinese economy.

Crude oil rallied above $60 per barrel this week. SPDR Energy (XLE) climbed 1.63 percent. First Trust ISE Revere Natural Gas (FCG) jumped 7.81 percent as a cold blast in the U.S. boosted natural gas prices.

Earnings season doesn’t begin in earnest until mid-January, but some major firms reported this week. FedEx (FDX) missed forecasts and its shares fell more than 10 percent. Micron Technology (MU), General Mills (GIS), Carnival (CCL) and ConAgra (CAG) delivered better results and saw their shares. CAG gained nearly 24 percent.


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