Market Perspective for September 8, 2017

Energy, consumer staples and healthcare led this week, but the overall market drifted lower as investors assessed Hurricane Irma. SPDR Energy (XLE), Consumer Staples (XLP) and Healthcare (XLV) rallied 1.29, 0.22 and 1.61 percent respectively. SPDR S&P Insurance (KIE) fell 2.76 percent. Shares were down more than 5 percent by Thursday, but rallied sharply on Friday.

Economic data was solid this week. July factory orders fell 3.3 percent, but rose when aircraft orders were subtracted. A large order for Boeing (BA) jets in June made for a tough comparison in July. The ISM nonmanufacturing index rose from 53.9 in July to 55.3 in August, signaling a more robust expansion. Initial unemployment claims jumped to 298,000, due solely to hurricane activity. Once rebuilding starts, we will see an even larger sustained increase in employment.

Medical devices and pharmaceuticals lifted healthcare. iShares U.S. Medical Devices (IHI) climbed 2.05 percent this week, SPDR S&P Pharmaceuticals 0.84 percent. Last week’s buyout of Kite Pharma (KITE) by Gilead Sciences (GILD) and landmark approval of Novartis’ genetically-engineered leukemia drug carried over into this week’s profits. AbbVie (ABBV) announced a successful eczema study this week. Shares rallied more than 10 percent on the news.

Energy stocks performed well this week, but commodity prices were volatile. As the recovery from Hurricane Harvey begins, the reopening of oil pipelines and refineries has raised oil prices, while lowering gasoline prices. Hurricane Irma will dampen demand for both crude and gasoline in the short-term. U.S. Gasoline (UGA) fell 5.45 percent on the week.

United Technologies’ (UTX) bid for Rockwell Collins (COL) weighed on iShares U.S. Aerospace & Defense (ITA). ITA fell 1.43 percent on the week.

Kroger (KR) shares slid double-digits early Friday morning, despite meeting earnings estimates and beating revenue forecasts. Investors worry Amazon’s (AMZN) price war will cut into margins going forward. Target (TGT) announced price cuts on thousands of items in response to Amazon’s recent Whole Foods cuts.

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