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.

 

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