Market Perspective for August 31, 2019

Equities rallied this week on low volume ahead of the Labor Day weekend. The Dow Jones Industrial Average advanced 2.94 percent, the S&P 500 Index climbed 2.69 percent, the Nasdaq 2.59 percent and the Russell 2000 Index 2.39 percent.

SPDR Communication Services (XLC) gained 3.38 percent, SPDR Financial (XLF) 3.14 percent, SPDR Materials (XLB) 3.13 percent and SPDR Industrial (XLI) 3.60 percent. All eleven of the S&P 500 sectors were positive for the week.

Low volatility funds delivered a strong performance. iShares Edge MSCI Minimum Volatility USA ( USMV) gained 2.08 percent. Vanguard Dividend Appreciation (VIG) benefited from heftier industrial exposure and climbed 2.84 percent. Schwab U.S. Dividend (SCHD) has larger weightings in Dow Industrial stocks and rallied 3.04 percent.

Economic data showed an improving U.S. economy. July durable goods orders increased 2.1 percent, beating expectations and rising from June’s 1.8 percent. The Conference Board’s consumer confidence index slipped from 135.8 to 135.1 in August, but that was still ahead of expectations of a decline to 127.8. The University of Michigan’s consumer sentiment survey slowed to 89.8 as it picked up investor concerns over the Federal Reserve’s rate cut.

Weekly jobless claims remain near multi-decade lows at 215,000. The GDP revision trimmed growth to 2 .0 percent from 2.1 percent, but that was better than the economist consensus of 1.9 percent. The Bureau of Economic Analysis’ measures of consumer spending and core inflation for July both met forecasts at 0. 6 percent and 0.2 percent growth. Strong consumer spending and low inflation are a recipe for solid growth heading into the final months of 2019.

Bond yields peaked mid-week. The 10-year Treasury yield hit a low of 1.45 percent on Wednesday before closing the week at 1.51 percent. iShares Barclays 20+ Year Treasury (TLT) climbed 0.93 percent for the week, but that was below the 1.60 percent gain it had early on Wednesday. iShares iBoxx High Yield Corporate Bond (HYG) increased 0.68 percent on the week. Fidelity Corporate Bond (FCOR) returned 0. 24 percent.

The U.S. Dollar Index rallied 1.30 percent after investors focused on the potential for quantitative easing at the European Central Bank. Still, iShares MSCI EAFE (EFA) gained 2.02 percent and a relief rally in beaten down emerging markets lifted iShares MSCI Emerging Markets (EEM) 2.87 percent.

Earnings season was hit and miss with a wide spread between retailers. Dollar General (DG) and Tiffany’s (TIF) returned 13.94 percent and 4.37 percent, respectively, after delivering solid earnings. Best Buy (BBY) and Ulta Beauty (ULTA) slid 3.87 percent and 26.27 percent after missing forecasts. Hewlett Packard Enterprise (HPE) advanced 8.39 percent this week, while Workday (WDAY) slipped 7.73 percent.

Earnings season is almost finished with 99 percent of companies reporting. The earnings growth rate for the quarter is negative 0.4 percent, up from the negative 2.7 percent consensus forecast at the end of June.

Market Perspective for August 26, 2019

The Nasdaq advanced 1.32 percent on Monday, the Russell 2000 Index 1.13 percent, the S&P 500 Index 1.10 percent and the Dow Jones Industrial Average 1.05 percent.

Technology and communication services led the market. SPDR Communication Services (XLC) advanced 1.50 percent and SPDR Technology (XLK) 1.39 percent. SPDR Consumer Staples (XLP) climbed 1.24 percent.

iShares Edge MSCI Minimum Volatility USA (USMV) returned 1.01 percent on Monday. The fund continues to outperform during market weakness, but more closely tracks the market to the upside. Vanguard Dividend Appreciation (VIG) was even stronger. It rose 1.06 percent.

Durable goods orders rose 2.1 percent in July, beating expectations.

The Case-Shiller home price index for June is out on Tuesday along with the Conference Board’s consumer confidence index. Analysts predict it declined from 135.7 in July to 128. However, analysts see the University of Michigan consumer sentiment survey rising to 92.3. The latter will be released on Friday.

The second estimate of second quarter GDP is out on Thursday. Economists predict the government will revise growth from 2.1 percent to 2.0 percent.

The 10-year Treasury yield rallied along with stocks on Monday. It closed at 1.54 percent. Bonds were broadly higher. iShares iBoxx High Yield Corporate Bond (HYG) closed very close to a new 52-week high.

The U.S. Dollar Index advanced 0.43 percent. Dollar strength boosted the relative return of SPDR S&P 500 (SPY) versus the international competition. SPY climbed 1.11 percent on Monday, iShares MSCI EAFE (EFA) 0.82 percent and iShares MSCI Emerging Markets (EEM) 0.56 percent. Emerging market currencies fell after the Chinese yuan weakened 0.53 percent.

Autodesk (ADSK), J.M. Smucker (SJM), Hewlett Packard Enterprise (HPE), Bank of Nova Scotia (BNS), Bank of Montreal (BMO), Tiffany (TIF), Five Below (FIVE), Altaba (AABA) Okta (OKTA), Williams-Sonoma (WSM), Workday (WDAY), Ulta Beauty (ULTA), Best Buy (BBY), Dollar Tree (DLTR), Dollar General (DG), Big Lots (BIG) and Campbell Soup (CPB) headline  companies reporting earnings this week.

 

The ETF Investor Guide for August 2019

The August Issue of the ETF Investor Guide is AVAILABLE NOW! Links to the August Data Files have been posted below. Market Perspective:  Volatility Will Continue Overseas weakness pulled U.S. […]

Market Perspective for August 19, 2019

Equities rallied on Monday as the market extended its relief rally amid stimulus talk in Germany and interest rate reform in China. The Nasdaq was the best performing index on the day, rising 1.35 percent. The S&P 500 Index returned 1.21 percent on the day, while the Dow Jones Industrial Average gained 0.96 percent.

Energy, communication services and technology sectors led the market higher. SPDR Energy (XLE) bounced 2.21 percent, SPDR Communication Services (XLC) 1.56 percent and SPDR Technology (XLK) 1.52 percent. iShares Barclays 20+ Year Treasury (TLT) slid 1.43 percent.

Economic data will be light this week. Existing home sales for July are out on Wednesday and new home sales on Friday. Analysts forecast an annualized pace 5.40 million existing homes sold and 650,000 new homes. The flash PMIs for August are out on Thursday.

The minutes from the July meeting are out on Wednesday, but the main event is the Fed’s Jackson Hole symposium. Central bankers, economists, policymakers and finance leaders from around the world attend the three-day event.

Most Jackson Hole symposiums are academic discussions of monetary policy and central banking. With central banks cutting interest rates and the European Central Bank hinting more quantitative easing could come in September, the 2019 theme of “Challenges for Monetary Policy” is on point. Federal Reserve Chairman Powell will give his keynote address on Friday morning.

The U.S. Dollar Index climbed 0.2 percent on Monday after Germany said it could spend as much as $55 billion on stimulus as that economy teeters on the edge of recession. Over the weekend, China announced the market will be allowed to set interest rates on loans. The central bank hopes the move will increase lending to small and medium sized businesses.

Retail earnings season is in full swing this week. Home Depot (HD), Lowe’s (LOW), TJX Companies (TJX), Kohl’s (KSS), J.C. Penney (JCP), Urban Outfitters (URBN), Target (TGT), Nordstrom (JWN), L Brands (LB), The Children’s Place (PLCE), GAP (GPS), Ross Stores (ROST) and Foot Locker (FL) are among the larger names reporting.

Medtronic (MDT), Toll Brothers (TOL), Royal Bank of Canada (RY), Analog Devices (ADI), Hormel (HRL), Intuit (INTU), Hewlett-Packard (HPQ) and Cree Inc (CREE) are some of the non-retailers delivering earnings.

Estee Lauder (EL) delivered strong earnings and guidance on Monday and shares climbed 12.52 percent.