Market Perspective for December 17, 2018

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.

 

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