Market Perspective for August 27, 2018

The Nasdaq climbed above 8000 to another record high on Monday amid a broad rally in stocks. The S&P 500 Index and Russell 2000 Index also closed at new all-time highs. The Dow closed at its highest level since February 2, and just 2 percent from its all-time high. Materials, financials and industrials were the strongest sectors.

SPDR Materials (XLB) advanced 1.35 percent on Monday. DowDuPont (DWDP) gained 2.33 percent. Fertilizer stocks also performed well, led by a 3.31-percent increase in Mosaic (MOS).

A trade deal with Mexico boosted transportation stocks. Railroad Kansas City Southern (KSU) gained 4.68 percent and iShares Transportation Average (IYT) returned 1.11 percent. SPDR Industrials (XLI) rallied 1.20 percent.

Brokerages and investment banks lifted the financial sector. iShares U.S. Broker-Dealers (IAI) climbed 1.40 percent. SPDR Financial (XLF) rose 1.24 percent to trade at its highest level since mid-March.

This week will be relatively light on economic reports. The GDP revision will be out on Wednesday. Economists expect second-quarter GDP growth will be lowered 0.1 percentage points to 4.0 percent. August consumer confidence, July pending home sales and July PCE core inflation are also on tap.

The U.S. Dollar Index weakened by 0.4 percent, the seventh dip in the past eight days. Crude oil rallied towards $69 a barrel on Monday. Foreign shares also outperformed with iShares MSCI EAFE (EFA) climbing 1.38 percent and iShares MSCI Emerging Markets (EEM) rising 1.36 percent.

The 10-year Treasury yield moved higher on Monday, but at 2.85 percent remains near its six-month lows. Odds of a September rate hike hit 99.2 percent.

Retail earnings season winds down this week, but there are still several large chains reporting. Among them are Best Buy (BBY), Tiffany & Co. (TIF), BJ’s Wholesale (BJ), American Eagle (AEO), Dick’s Sporting Goods (DKS), Guess (GES), Chico’s FAS (CHS), Dollar General (DG), Dollar Tree (DLTR), lululemon (LULU), Ulta Beauty (ULTA), Burlington Stores (BURL), Michaels Companies (MIK) and Big Lots (BIG).

Also reporting this week are Salesforce.com (CRM), Brown Forman (BF), Eaton Vance (EV), H&R Block (HRB), Hewlett Packard Enterprise (HPE) and Campbell Soup (CPB).

 

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