Month: September 2017

The Russell 2000 joined the Dow Jones Industrial Average, Nasdaq and S&P 500 when it exceeded its old high on Friday. The Russell 2000 was the strongest index this week with a 1.33-percent rise. The Dow and S&P 500 saw smaller gains, while the Nasdaq slipped after hitting a new high on Tuesday.

SPDR S&P Regional Banking (KRE) rallied 10.1 percent over the past 11 trading sessions. iShares U.S. Aerospace & Defense (ITA) gained 3.97 percent this week. It has risen for seven consecutive sessions.

Apple fell 5.0 percent this week and dragged the technology sector with it. Consumer discretionary also moved lower as Amazon (AMZN) declined.

Japanese and European central banks are still engaged in quantitative easing. The next important shift will come when the ECB changes its quantitative easing policy. Investors expect details at the October meeting. Currently, the ECB is buying $60 billion a month in bonds. It is approaching legal limits on how much debt it can own in a single country, which will force it to reduce government bond purchases. Until the ECB changes policy, the effects of the Fed’s policy on world financial markets will be limited.

Housing starts slowed slightly in August, but building permits increased. iShares U.S. Home Construction (ITB) made a new intraday 52-week high.

Unemployment claims tumbled to 259,000 last week. Economists expected the number to stay near 300,000 in the wake of Hurricanes Harvey and Irma, but almost half of the decline came from Texas.

FedEx (FDX) earned $2.51 adjusted for one-time items in the prior quarter, well below forecasts of $3.09 and down from $2.82 a year ago. The company blamed a cyberattack, Hurricane Harvey and higher-than-expected merger costs. It also lowered guidance for 2018. Investors bid shares up 2 percent, nonetheless, sending FedEx to a new all-time high.

The major indexes hit new all-time highs over the past week, with only the Russell 2000 trailing.  iShares Russell 2000 (IWM), however, is just 0.5 percent from joining them.

SPDR Financials (XLF) approached its 52-week high set in August this week. Investment banks and brokerages are trading at new highs. The big swing in rate hike expectations over the past month also lifted the sector.

Industrials rallied strongly as merger activity in the defense subsector continued with Northop’s (NOC) offer for missile maker Orbital (OA).

Energy has been in a clear bear market since 2014. It rallied in 2016, but has been in a corrective phase since December. This past week SPDR Energy (XLE) rebounded and broke that downtrend. With West Texas Intermediate crude struggling to hold the $50 level, however, look for energy to correct in the coming week.

Materials hit a new all-time high last week. Hurricane recovery and rising commodity prices boosted shares. The chemicals subsector is particularly strong right now.

Although SPDR Technology (XLK) also hit a new all-time high this past week, Apple (AAPL) peaked ahead of the iPhone8 and iPhone X unveiling. Slower pre-orders for iPhone 8 and some other issues have since hit the stock. The third chart below shows XLK relative to SPDR S&P 500 (SPY). Shares of Google (GOOGL) remain in a corrective phase and shares of Oracle (ORCL) fell on disappointing earnings guidance last week. Social media and semiconductors have been the best performing subsectors over the past week.

Senate Republicans resurrected healthcare reform this week. A new bill will take federal money raised under the Affordable Care Act and give it to states as block grants. States must use the money on healthcare, but can deviate from ACA rules. The news caught the market by surprise and traders sold healthcare providers amid increased uncertainty. The latest count shows the bill is short by two votes. Three GOP Senators voted against the prior bill. Reports say two of them are undecided.

Biotech has emerged as the strongest subsector in healthcare this month.

A rise in building permits and better-than-expected housing starts in August fueled heavy buying of homebuilder shares. iShares U.S. Home Construction’s (ITB) volume spiked to its highest level since the November election. The prior one-day high was in July 2016 during the post-Brexit rally.

Gold and gold mining both sold off in September. The Japanese yen and Chinese yuan also weakened in September. The euro is near its 52-week high.

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.