Market Perspective for August 24, 2018

The S&P 500 gained 0.86 percent this week to close at its first record high since January.  The Nasdaq also hit a new high with a 1.66-percent 5-day advance, and the Russell 2000 Index gained 1.93 percent on the week.

Existing home sales hit an annualized pace of 5.34 million in July. Sales were down 1.5 percent from a year ago. Inventory remains low. Prices have increased 4.5 percent in the past 12 months and the average home has sold within a month of listing. New homes sales remained at the midpoint of the ascending range in place since 2010. July sales were an annualized 627,000.

Weekly jobless claims stayed near four-decade lows at 210,000. The flash manufacturing and service PMIs show robust expansion for August. The final number is due next week.

Federal Reserve meeting minutes show officials are aiming for a September rate hike, consistent with futures market odds. Officials also discussed changing the language in the Fed policy statements from accommodative to neutral. Futures market odds of a fourth hike in December remain in the 65 to 75 percent range seen over the past few weeks.

Crude oil rebounded to $68.72 per barrel this week after a large decline in inventory.

The U.S. Dollar Index snapped a 5-day losing streak on Thursday as emerging markets declined. The Brazilian real fell below $0.25 as speculators moved beyond Turkey. South Africa’s rand also slid after the country’s recent constitutional change that allows the government to seize white-owned farmland. Reports say landowners are being compensated about 10 cents on the dollar. Economic sanctions on Turkey broke that nation’s currency. Speculators are betting South Africa could follow a similar trajectory.

SPDR S&P Retail (XRT) hit a new all-time high this week with solid retail earnings. Target (TGT) headlined the week with a strong earnings beat. Lowe’s (LOW) gained as much as 10 percent after its earnings report before giving back some of those gains. Retail’s strength also lifted SPDR Consumer Discretionary (XLY).

Medical device maker Medtronic (MDT) beat sales and profit forecasts. iShares U.S. Medical Devices (IHI), which counts MDT as its top holding, climbed to a new 52-week high.

 

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