Market Perspective for July 20, 2018

Transportation stocks led market performance this week with strong earnings reports from airlines and railroads. The Dow Transports climbed 1.85 percent. The Russell 2000, rose 0.58 percent.

Retail sales increased 0.5 percent in June and May’s growth was revised higher to 1.3 percent, making for an impressive two-month growth figure. Industrial production increased 0.6 percent and capacity utilization hit 78.0 percent.

The homebuilders’ confidence index held steady at 68. The volatile home starts figure missed estimates in June, but building permits remained strong. Weekly jobless claims fell to 207,000. Adjusted for population, this is by far the lowest weekly jobless claim figure of the past 50 years.

Federal Reserve Chairman Jerome Powell’s confident testimony combined with the stronger U.S. dollar pummeled gold. SPDR Gold Shares (GLD) declined 0.87 percent.

United Continental (UAL) advanced 12.22 percent this week following its earnings beat. CSX Corp (CSX) rallied 7.34 percent. The U.S. Global Jets ETF (JETS) climbed 2.62 percent.

Financials continued to advance throughout the week. SPDR Financials (XLF) gained 2.11 percent following solid earnings from Bank of America (BAC), Morgan Stanley (MS) and a buyback announcement from Berkshire Hathaway (BRK.A). Bank of America, Morgan Stanley and J.P. Morgan (JPM) all gained more than 4.5 percent this week. Berkshire Hathaway is the number-one holding in XLF at 11.5 percent of assets. It gained 3.23 percent on the week.

Industrials also performed well on the week. SPDR Industrial (XLI) rose 0.94 percent and SPDR Consumer Staples (XLP) rallied 0.23 percent. SPDR S&P Regional Banking (KRE) advanced 2.68 percent on the broader financial rally. First Trust Nasdaq ABA Community Bank (QABA) climbed 2.97 percent.

Netflix (NFLX) fell more than 10 percent at one point this week following its earnings announcement. Although it beat earnings estimates, it missed on subscriber growth. It also lowered third-quarter subscriber growth estimates in light of what appears to be at least a temporary slowdown in growth. Netflix finished the week above its lows, but down 8.78 percent.

General Electric (GE) lost 5.47 percent this week despite beating earnings estimates. Profits fell 30 percent from last year. Microsoft (MSFT) gained 0.80 percent this week after it beat earnings and revenue estimates. The software giant also lifted revenue guidance.


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