Market Perspective for May 18, 2018

The Russell 2000 led the market this week with a 1.23-percent gain. SPDR Industrials (XLI) advanced 0.83 percent, but SPDR Technology (XLK) lost 1.45 percent. Brent crude oil topped $80 for the first time in years. SPDR Energy (XLE) advanced 1.80 percent.

Treasury yields made important technical breakouts over the past week. The 10-year peaked at 3.12 percent and the 30-year 3.25 percent before settling back on Friday. Utilities struggled against long-term interest rates. SPDR Utilities (XLU) fell 2.76 percent.

SPDR S&P Retail (XRT) rallied 2.11 percent this week on strong retail sales and a big earning surprise. The government revised March retail sales higher to 0.8 percent and reported 0.3 percent growth in April. Rising consumer spending buoyed some retail stocks, with Macy’s (M) own management surprised by its strong earnings and sales last quarter. Macy’s gained 14.57 percent on the week. It wasn’t all roses for retail with both Nordstrom (JWN) and JCPenney (JCP) suffering setbacks. Wal-Mart (WMT) beat forecasts due to improving online sales.

Homebuilder confidence climbed in May according to the National Association of Homebuilders. Builders have continued to combat tight labor markets and rising material costs. Housing starts and building permits missed expectations but rose from year-ago levels. Jobless claims rose to 222,000 in the week ended May 12, still close to 40-year lows. Industrial production climbed 0.7 percent in April. Household debt grew 3.8 percent in the first quarter, down from 4.6 percent in the prior quarter.

Boeing (BA) pulled the aerospace and industrial sector higher this week. Shares rallied 2.56 percent after it was rumored China offered a $200 billion reduction in the bilateral trade deficit. China quickly denied the rumor but Boeing shares held their gains.

Applied Materials (AMAT) fell 8.25 percent on Friday after reporting earnings. Third-quarter guidance was below expectations. Applied Materials supplies chip and display makers. The company sees softer demand from the smartphone market. Cisco (CSCO) beat earnings, but guidance was in line with estimates. Shares dipped 5.92 percent on the week.

The U.S. Dollar Index climbed another 1 percent this week. It has gained nearly 5 percent since the start of the rally in mid-April. The greenback has risen for five consecutive weeks.

iShares MSCI EAFE (EFA) fell 0.61 percent on the week, nearly matching the SPDR S&P 500’s (SPY) 0.56-percent decline. iShares MSCI Emerging Markets (EEM) fell 2.81 percent as EM currencies remained stressed.


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