Year: 2018

Economic data was solid this week. November housing starts, building permits and existing home sales all beat expectations and rose from October. Homebuilder optimism did ease in high-priced housing areas, due to higher interest rates.

The Federal Reserve raised rates this week, though officials signaled a slightly less hawkish footing in 2019.

While economic data was strong, a day of political uncertainty shepherded another day of losses. The Nasdaq has fallen more than 20 percent from its all-time August high this week. It led the broad indexes lower with a loss of 8.3 percent for the week. The Dow Jones Industrial Average declined of 6.9 percent, while the S&P 500 lost 7.1 percent.

For the week, SPDR Technology (XLK) slid 7.93 percent and SPDR Consumer Discretionary (XLY) 8.00 percent.  Facebook’s (FB) privacy scandal expanded and its shares slid 13.25 percent. Facebook’s performance dragged SPDR Communication Services (XLC) lower by 8.42 percent.

Crude oil slipped to a $45 handle on Friday. Natural gas closed the week with a small loss at $3.71 per mmBTU.

iShares MSCI Emerging Markets (EEM) and iShares MSCI EAFE (EFA) saw smaller losses of 1.86 and 3.76 percent. The U.S. Dollar Index fell 0.35 percent on the week.

Interest rates remain steady despite stock market sell-off. iShares 20+ Year Treasury (TLT) gained 2.12 percent on the week. The 10-year Treasury yield rebounded to 2.79 percent on Friday after bottoming at 2.75 percent on Thursday.

Earnings were mixed this week. Shares of Nike (NKE) rallied 7.15 percent on Friday after it beat earnings expectations. FedEx (FDX) fell 14.18 percent.

Note: The stock market will close at 1 PM on Monday for Christmas Eve and will close on Christmas Day. Many European markets will also close on December 26.

The S&P 500 Index declined 2.08 percent on the day. Equities dipped as investors sold interest rate sensitive utilities and REITs. SPDR Utilities (XLU) and SPDR Real Estate (XLRE) slumped 3.24 and 3.71 percent, respectively. Amazon (AMZN) fell 4.48 percent.

The Federal Reserve will meet on Wednesday. The Fed is expected to increase interest rates by 25 basis points. Macro data shows a resilient economy, with key data such as industrial production rising in November.

Homebuilder confidence declined to 56 in December, down from 60 in November. Any reading above 50 signals optimism. With long-term rates declining and the Fed poised to turn dovish, homebuilders expect conditions to improve.

Durable goods, consumer sentiment, the Philly Fed manufacturing survey and weekly initial claims for unemployment will all get a close look following the Fed meeting.

The S&P 500 Index slid 2.00 percent on Monday. It underperformed iShares MSCI Emerging Markets (EEM) and iShares MSCI EAFE (EFA), which fell 0.93 and 0.79 percent respectively. They both benefited from the U.S. Dollar Index weakening by 0.30 percent. Emerging market funds have shown relative strength since early October, but they remain vulnerable to China’s slowing economy and a U.S. dollar that hit a new 52-week high on Friday.

Oracle (ORCL) beat earnings after hours Monday on strong cloud services sales. Analysts were expecting 78 cents per share, but the company delivered 80 cents. Other major earnings this week include Micron (MU), FedEx (FDX), Darden Restaurants (DRI), General Mills (GS), Paychex (PAYX), Rite Aid (RAD), Walgreens (WBA), Nike (NKE), Carnival (CCL) and CarMax (KMX) round out a relatively active week.

For the week, the Nasdaq slipped 0.84 percent, while both the S&P 500 and Dow Jones Industrial Average lost 1.2 percent.

While the market was down slightly on the week, U.S. economic data was strong. The Job Openings and Labor Turnover Survey (JOLTS) showed 7.1 million openings in October, up from 7.0 million in September. The National Federation of Independent Business’ small business confidence index slipped to 104.8 but remains near all-time highs. The consumer price index, both headline and core, met expectations. The producer price index was higher than expected.

Initial claims for unemployment hit 206,000, well below forecasts of 226,000 and still near 2018 lows. Retails sales rose 0.2 percent in November, stronger than expected. Industrial production was also solid. As a result of positive surprises this week, the Atlanta Federal Reserve’s GDP Now model hiked its 4th quarter GDP growth forecast from 2.5 percent to 3.0 percent.

The odds of a December interest rate increase slipped to 73 percent by Friday. The Fed typically hikes when odds are higher than 70 percent. If the Fed choses to keep rates as is at the meeting next Wednesday, it would be bullish for stocks.

The U.S. Dollar Index climbed 1 percent on the week and closed at a new 52-week high on Friday.

Johnson & Johnson (JNJ) slid 10 percent as a report surfaced that the firm knew about asbestos in its baby powder as far back as 1971. As JNJ is a significant player in the healthcare sector, most sector specific funds were negative on the day.