Month: September 2017

Stocks started the week at new all-time highs. The Dow Jones Industrial Average and S&P 500 finished last week at record highs and the Nasdaq joined them on Monday. The Russell 2000 is less than 1 percent off its all-time high. Technology, industrials and materials also moved into record territory on Monday. Healthcare is also on track for a new high this week.

The Fed is expected to announce the start of its balance sheet reduction at Wednesday’s meeting. The Fed isn’t expected to raise interest rates at this meeting, but it could open the door to a December rate hike. The odds of a December increase hit 57 percent on Monday.

The 10-year Treasury yield rallied for a seventh consecutive trading session on Monday, from a low of 2.05 percent to nearly 2.25 percent. SPDR S&P Regional Banking (KRE) gained nearly 8 percent over this period.

The NAHB home builders index eased to 64 in September, but it was due primarily to concerns about the cost of labor and materials, a sign of robust demand in the sector. On Tuesday, housing starts and building permits for August will be released, followed by existing home sales on Wednesday. iShares U.S. Home Construction (ITB) is trading very close to its all-time high.

Federal Reserve Chair Yellen will hold her quarterly press conference on Wednesday. Along with the policy statement, Fed officials will release an update of their interest rate “dot plot.”

Defense stocks rallied strongly on Monday as rhetoric around North Korea heated up. iShares U.S.  Aerospace & Defense (ITA) climbed to a new all-time high.

Congressional Republicans are close to an Obamacare repeal. The new bill would abolish the individual mandate, but not cut funding. Instead, states would receive block grant funding. Those that wish to continue with Obamacare policies would be free to do so, while those opposed could design alternative programs. iShares U.S. Healthcare Providers (IHF) fell on the day, but the rest of the sector was flat or higher.

SPDR Energy (XLE) climbed to its highest level since early August on Monday. Crude oil hovered near $50 a barrel. Gasoline prices have stabilized after correcting about 10 percent. Natural gas prices appear to be bottoming as the last week of summer gives way to autumn. Industrial commodities rebounded on Monday after sliding last week on weaker Chinese economic data.

Several retailers will report earnings this week, including Bed Bath & Beyond (BBBY) and AutoZone (AZO), Adobe Systems (ADBE) and General Mills (GIS).  FedEx (FDX) will report on Tuesday. Analysts forecast $3.17 per share in earnings, up from $2.90 a year ago.

Equities climbed into record territory this week. Energy and insurance rebounded strongly and every major sector moved higher except utilities, which was weighed by rising interest rates. The Dow Jones Industrial Average and Russell 2000 were the strongest of the major indexes. They rose 2.16 and 2.31 percent, respectively.

Speculators prepared for Hurricane Irma by selling insurers ahead of the storm. They spent the early part of this week unwinding those trades. SPDR S&P Insurance (KIE) climbed 2.72 percent this week. Energy was also a winner. The recovery from Harvey is bringing supply back online. Demand is also stronger than expected thanks to Irma weakening. SPDR Energy (XLE) rallied 2.24 percent. West Texas Intermediate crude oil moved above $50 on Thursday.

Weekly jobless claims hit 284,000, slightly down from last week and below estimates. It’s still about 40,000 higher than the pace seen before the hurricanes. Retail sales missed expectations, falling 0.2 percent. Sales ex-autos increased 0.2 percent.

The Job Openings and Labor Turnover Survey showed 6.2 million openings. The quit rate climbed to 2.2 percent. The Producer Price Index (PPI) rose 0.2 percent in August. Average oil prices were about 10 percent higher than August 2016. This bump will fade in the coming months unless oil sustains a rally into the mid-to-upper $50 range. Consumer prices also rose with gasoline prices and rent. Core inflation met analyst forecasts of 0.2 percent. Consumer sentiment remained strong in September, though the hurricanes likely contributed to the small decline from the August reading.

Chinese fixed-asset investment and industrial production has slowed. Copper is down 7 percent from its high a week ago. China’s credit growth is slowing as well. The money supply growth rate hit a new 20-year low in August. Bank loans have increased slightly, due primarily to the crackdown on shadow banking.

Apple (AAPL) unveiled the iPhone 8 and iPhone X this week. The iPhone X uses face recognition technology to unlock and the cheapest version will retail for $999. Shares of Apple fell as traders reversed bets made ahead of the announcement.

North Korea fired another missile over Japan on Friday morning (local time), but the news barely impacted financial markets. iShares MSCI South Korea (EWY), the fund most sensitive to North Korean provocation, rallied 0.61 percent on Friday. Defense stocks rallied as well. iShares U.S. Aerospace & Defense (ITA) gained 1.79 percent on the week.

Oracle (ORCL) beat earnings and sales estimates this week, but guidance disappointed investors. Cloud services increased 50 percent. Software and services increased 62 percent. Going forward, Oracle sees that growth slowing to around 40 percent. Analysts forecast earnings of 68 cents in the coming quarter, but Oracle guided them down to a range of 64 to 68 cents. Shares fell 7.67 percent on Friday. The dip weighed on iShares North American Software (IGV), which dipped 0.84 percent. Broader technology funds such as Vanguard Information Technology (VGT) climbed on the day. VGT increased .50 percent on the week.

Equities opened higher on Monday after Hurricane Irma weakened rapidly on Sunday. SPDR S&P Insurance (KIE) rose 3 percent at the opening to its highest level in two weeks. The 10-year Treasury yield rebounded above 2.1 percent for the largest one-day rally in nearly a month. The odds of a December rate hike jumped 10 percent in the futures market to 41 percent. SPDR Utilities (XLU) hit a new 52-week high.

U.S. Gasoline (UGA) has reversed about half of its storm-related rally, while oil climbed.  Chemical companies also advanced strongly. DowDuPont (DWDP) climbed near its 52-week high on Monday.

Building material companies fell on Monday as investors reassessed the cost of rebuilding. Martin Marietta Materials (MLM) fell nearly 4 percent and Vulcan Materials (VMC) nearly 3 percent. Martin Marietta Materials had gained 9 percent in the wake of Hurricane Harvey.

Healthcare also achieved a new 52-week high on Monday. Pharmaceuticals and healthcare providers led the sector, while biotechnology saw a slight decline in early trading. Although the overall biotech sector was down, key large-cap stocks Amgen (AMGN) and AbbVie (ABBV) rose to new 52-week highs. In the past three weeks, AbbVie has gained 23 percent, Gilead Sciences (GILD) 17 percent, Biogen (BIIB) 16 percent and Amgen (AMGN) 11 percent.

This week a slew of third-quarter economic data will be released. Tuesday will bring the JOLTS report for July. Economists forecast 5.97 million job openings. August inflation data will be out on Wednesday and Thursday. First, the producer price index is expected to have risen 0.3 percent, well above July’s decline of 0.1 percent. The CPI is also forecast to rise 0.3 percent, with core prices rising 0.2 percent. Retail sales for August will be available on Friday. Analysts predict a rise of 0.1 percent, 0.4 percent ex-autos. Business inventories for July and consumer sentiment in September will also be out on Friday.

China will report fixed-asset investment, real estate investment, industrial production and new loans this week. Canadian housing starts in August beat expectations. The July home price index will be out later this week. The Canadian central bank hiked interest rates last week, fully reversing cuts made as oil prices plummeted between late 2014 and early 2016. The cuts overheated an already booming housing market that is starting to unravel in cities such as Toronto.

We are in the lull before third-quarter earnings season kicks off in October, but a few notable firms will continue to stream in.  Analysts predict Oracle (ORCL) earned 55 cents per share, up from 49 cents last year. Oracle is a top-10 holding in many technology funds.