Market Perspective for June 23, 2017

The healthcare sector was propelled by breakouts in biotechnology and pharmaceuticals this week, while medical devices and healthcare providers continued to trade in established bull markets. iShares Nasdaq Biotechnology (IBB) gained 9.56 percent this week, SPDR S&P Pharmaceuticals (XPH) 6.35 percent and SPDR Healthcare rose 3.60 percent.

The Nasdaq gained 1.84 percent this week, the Dow Jones Industrial Average gained 0.05 percent, the S&P 500 Index 0.21 percent and the Russell 2000 Index 0.57 percent.

Economic data was light this week, but overall positive. Both new and existing home sales rose faster than expected in May. New homes sales were strongest, rising 8.9 percent from May 2016. Median home prices surged 11.5 percent from April’s $310,200 to $345,800. The median new home prices have increased 16.8 percent in the past year.

Flash PMIs for June suggest U.S. manufacturing and services sectors expanded slightly slower than in May. New orders, however, picked up, a positive signal for growth in the coming months.

Oil prices tumbled again this week. West Texas Intermediate crude slipped below $43 a barrel. Rig counts and production continue rising in the U.S. market. Energy subsectors fell to fresh 52-week lows. If it wasn’t for large-cap integrated oil firms such as Chevron (CVX), broad energy funds such as SPDR Energy (XLE) would also be trading at 52-week lows. Energy is the only major sector losing ground in 2017.

The 10-year Treasury yield was flat on the week. Short-term interest rates kept rising, with three-month Libor hitting 1.3 percent. The U.S. Dollar Index rose slightly, but remained in its tight trading range between 96.5 and 97.5.

The week’s key reports were both better than expected. Oracle (ORCL) lifted the technology sector substantially with strong earnings. Sales increased 1.8 percent and earnings 4.9 percent. Oracle’s shares closed the week at a new all-time high, the first new all-time high since the year 2000.

FedEx (FDX) beat fourth-quarter sales and earnings estimates. It was the first beat following two quarterly misses. The consensus called for earnings of $3.89 per share, but FDX delivered $4.25. Revenue was $15.7 billion, about $150 million above estimates. Management also raised guidance for FY2018. Shares climbed 2.5 percent on the week.

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