Month: August 2017

Major indexes rallied this week, led by large-cap tech in the Nasdaq.

SPDR Technology (XLK) is on the cusp of a new all-time high and Vanguard Information Technology (VGT) hit a new record as traders anticipate Apple’s (AAPL) launch of the iPhone 8 on September 12. Microsoft (MSFT) and Facebook (FB) are also approaching highs, while Google (GOOGL) and Amazon (AMZN) have been slower to rebound. SPDR Consumer Discretionary (XLY) bounced over the past week, but remains below its all-time high.

Apple, Microsoft and Facebook combine for 33.6 percent of assets in SPDR Technology (XLK). The narrow rally in XLK is contrasted by the underwhelming performance of PowerShares S&P Small Cap Information Technology (PSCT). The risk of a pullback is now elevated as the sector relies on fewer stocks.

Although insurers have large cash cushions to deal with the aftermath of Hurricane Harvey, traders reacted to the storm by selling insurance stocks.

Gilead Sciences (GILD) boosted biotechnology and the larger healthcare sector with its offer for Kite Pharma (KITE). Gilead had been one of the worst performing major biotech stocks coming into 2017 and it stayed in a downtrend until mid-June. The bounce pushed iShares Nasdaq Biotechnology (IBB) near its 52-week high. SPDR S&P Biotech (XBI) was at a new 52-week high on Wednesday. The fund is also within striking distance of its all-time high.

Industrial commodities pushed to new 52-week highs this week. Copper miners (COPX) and coal (KOL) achieved new highs, while steel (SLX) consolidated. The broader materials sector is still off its late-July high. Important Chinese economic data will be out next month. July’s data shows slowing real estate and fixed-asset investment.

Although Hurricane Harvey wreaked havoc in a major energy hub, oil prices fell and gasoline prices likely peaked as Valero (VLO) announced it will restarted refineries. Notice the spike in volume for United States Gasoline (UGA) over the past week. This rise in prices is unsustainable if oil prices keep sliding and gasoline inventory remains high. As for energy shares, they seem overdue for a bounce, but last week’s rebound has already begun to fade.

North Korea launched another missile this week. The financial markets briefly dipped in response, but the net result several days later is a new 52-week high in iShares U.S. Aerospace & Defense (ITA). Tensions have weighed on South Korea’s stock market, but iShares MSCI South Korea (EWY) has kept pace with the SPDR S&P 500 (SPY) since June.

The 10-year Treasury yield is near its lows in 2017 and the U.S. Dollar Index broke to a new low this week before rebounding. The dip in the U.S. Dollar Index came in the wake of North Korea’s missile test. If this is a blip and not a trend, the dollar should rebound strongly as it has over the past two days and eventually exceed its August high.

The Nasdaq and Russell 2000 gained on Monday, but energy and insurance weighed on the market as traders reacted to Hurricane Harvey. Crude oil prices tumbled, while gasoline prices rose after estimates of Texas refinery downtime increased.

Healthcare subsectors registered solid gains, with some biotechnology funds up more than 2 percent on the day. Gilead Sciences (GILD) announced a buyout of Kite Pharma (KITE), sending shares of both companies higher on the day.

The Conference Board’s August consumer confidence survey will be out on Tuesday and the University of Michigan’s survey on Friday. Both are expected to rise.

The revised estimate of second-quarter GDP growth will be released on Wednesday. Economists expect the government will report 2.8 percent growth, up from the initial 2.6 percent estimate.

Personal income, consumer spending, core inflation and pending home sales for July will be out on Thursday. Forecasts call for substantial increases of 0.4 percent in both income and consumer spending. In June, income was flat and consumer spending rose only 0.1 percent.

Friday will bring the monthly employment report. Economists predict 175,000 new jobs were created in August. Unemployment is expected to hold steady at 4.3 percent. August manufacturing PMIs are forecast to rise. Analysts see July construction spending rising 0.5 percent, up from a decline of 1.3 percent in June. August motor vehicle sales are expected to decline 0.1 million from June’s annualized pace of 16.7 million. Various manufacturing PMIs, Japanese retail sales, Canadian GDP growth and inflation in the Eurozone will also become available at the end of the week.

Interest rates were down modestly on Monday. The 10-year Treasury yield fell to 2.16 percent, its lowest level since late June. The low for the year is 2.10 percent. Traders tend to position around these levels looking for a break or reversal in the trend. With several key economic reports this week, we could see higher volatility in the bond market.

Earnings season is all but complete, but a few firms have yet to report. Some of the largest this week are Best Buy (BBY), H&R Block (HRB), Analog Devices (ADI), Ctrip.com (CTRP), Workday (WDAY), Dollar General (DG), and Campbell’s Soup (CPB).

Equities rallied this week following substantial gains on Monday and Tuesday. The Nasdaq gained 1.45 percent and SPDR Technology (XLK) 1.03 percent on the week. SPDR Healthcare (XLV) returned 1.21 percent and iShares Nasdaq Biotechnology (IBB) increased 2.26 percent. The Russell 2000 rallied 1.45 percent to lead index performance.

Federal Reserve Chair Janet Yellen’s Friday morning speech at the Jackson Hole symposium focused on financial stability and regulation, but was less hawkish on interest rates than many had anticipated. The 10-year Treasury yield and U.S. dollar declined on Friday as traders repositioned in response to Yellen’s comments. odds of a December rate hike, however, jumped from 33 percent to 40 percent.

Manufacturing and service sector flash PMIs both reflected expansion. Manufacturing was slightly lower than in July, while the service sector reading was much higher. The official number will be out next week.

New home sales were slower than expected in July at an annual pace of 571,000, below June’s 630,000. Existing home sales also declined to an annual pace of 5.44 million, slightly below forecasts. The dip in home sales reduced the Atlanta Fed’s GDP Now estimate of third-quarter growth to 3.4 percent. The consensus forecast remained unchanged at 2.7 percent.

Durable goods orders fell 6.8 percent in July, but beat expectations by 0.1 percent. Capital goods orders climbed 0.4 percent, up from June’s flat growth.

U.S. oil production (ex-Alaska) rose to its highest level since July 2015. Energy shares ended up on the week. SPDR Energy (XLE) gained 1.09 percent.

Amazon’s (AMZN) plan to cut prices at Whole Foods (WFM) sent competitors’ shares lower. Wal-Mart (WMT) and Costco (COST) fell, though grocers were by far the hardest hit. Kroger (KR) shares lost 8 percent over the course of an hour. Brick-and-mortar retail, however, rebounded on the week. SPDR S&P Retail (XRT) rallied 3.66 percent.

Shares of Medtronic (MDT) fell after the firm beat earnings, but missed revenue. iShares U.S. Medical Devices (IHI) dipped only 0.28 percent nonetheless as the broader healthcare sector advanced. Brothers (TOL) similarly beat earnings, but provided weaker guidance. iShares U.S. Home Construction (ITB) slipped 0.33 percent on the week.