Market Perspective for June 22, 2018

The Russell 2000 Index gained 0.10 percent this week. The other indexes declined as emerging markets weighed on global equities.

Utilities, energy and consumer staples were the best performing sectors this week. SPDR Utilities (XLU) advanced 2.4 percent, Energy (XLE) 1.4 percent, and Consumer Staples (XLP) 0.1 percent. OPEC voted to increase oil production by 700,000 barrels per day on Friday. Crude oil jumped more than $3 per barrel to near $70 as investors had priced in a rise of 1 million bpd or more. SPDR S&P Oil & Gas Exploration & Production (XOP) and similar energy subsector ETFs gained 3 to 5 percent.

SPDR Industrials (XLI) fell 3.3 percent. Caterpillar (CAT) and Boeing (BA) lost ground on the week as trade tensions escalated globally. General Electric (GE) was removed from the Dow Jones Industrial Average. It was the only surviving original member of the index. Since the Dow is a price-weighted index, GE’s slide into the low teens meant its weighting in the index fell to just 0.4 percent. Walgreen’s (WBA) will replace it.

The Supreme Court opened the door for states and localities to tax online retailers. Amplify Online Retail (IBUY) fell 1.4 percent on Thursday following the ruling. It was down 0.8 percent on the week. SDPR Technology (XLK) fell 1.3 percent on the week.

The manufacturing and services flash PMIs have eased in June but remain in expansion. Housing starts reached their highest level in more than a decade. Existing home sales declined 0.4 percent from April and 3 percent from year-ago levels. Initial unemployment claims fell to 218,000 and remain near four-decade lows. The Atlanta Federal Reserve kept its second-quarter GDP growth forecast at 4.7 percent.

The S&P 500 Index declined 0.8 percent on the week. iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) declined 1.2 and 2.3 percent, respectively. The U.S. Dollar Index and emerging- market currencies were largely flat on the week, while the Chinese yuan declined.

Shares of FedEx (FDX) fell 8.3 percent this week. The firm beat on earnings and revenue and shares initially rallied on the strong results. The beat, however, was generated by the sale of a division and lower taxes, and operating results were slightly weaker than forecast.  Oracle (ORCL) slid 4.7 percent for similar reasons. It beat analyst profit and sales estimates, but stopped detailing its cloud revenue leading investors to suspect the firm may be hiding slowing growth. Micron Technology (MU) moved higher after it too beat earnings but lost 2 percent on the week as the overall semiconductor sector lost 3.6 percent.



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