Market Perspective for June 18, 2018

Equities opened the week lower after German Chancellor Angela Merkel faced dissent over migration policy. iShares MSCI Germany (EWG) fell 2 percent before recovering slightly during Monday trading. As a major component in international funds, the dip in the German market weighed heavily on foreign shares.

U.S. markets were much stronger. The Russell 2000 Index gained on the day. Other indexes saw small losses. Crude oil prices rebounded, and Utilities saw a small gain as long-term interest rates declined.

The National Association of Home Builders index dipped 2 points to 68 in June, but remains near two-decade highs. Economists were looking for a big increase to 78, but rising lumber costs weighed. For all of 2018 the confidence index has averaged 70. This is the highest average reading of all-time. Tuesday will bring new home starts and building permits for May, followed by existing home sales on Wednesday. The flash PMIs for June will also be out this week.

The U.S. Dollar Index rose this week due to a dip in the Canadian and Australian dollars. The greenback was flat against most emerging-market currencies. It saw a small gain versus the euro. Emerging-market ETFs slid more than 1 percent on the day. Over the past month, both iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) have underperformed SPDR S&P 500 (SPY) by 5 percentage points. The rising U.S. dollar explains less than 2 percent of that performance gap.

Crude oil held above $65 a barrel on Monday, while natural gas prices were steady. Gold lost nearly $30 an ounce on Friday. It saw a small bounce on Monday.

FedEx (FDX) and Oracle (ORCL) will highlight earnings this week. Analysts expect FedEx will report 34 percent higher earnings versus last year, or $5.71 per share. They see earnings of $0.87 per share at Oracle, 6 percent higher than a year-ago.  Micron Technology (MU) is the other major report. Analysts forecast earnings growth of more than 100 percent as memory prices surged in the past year. FedEx, Oracle and Micron are major holdings in the transportation, software and semiconductor sectors. Kroger (KR), Darden Restaurants (DRI) and Blackberry (BB) will also report this week.

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