Market Perspective for December 21, 2018

Economic data was solid this week. November housing starts, building permits and existing home sales all beat expectations and rose from October. Homebuilder optimism did ease in high-priced housing areas, due to higher interest rates.

The Federal Reserve raised rates this week, though officials signaled a slightly less hawkish footing in 2019.

While economic data was strong, a day of political uncertainty shepherded another day of losses. The Nasdaq has fallen more than 20 percent from its all-time August high this week. It led the broad indexes lower with a loss of 8.3 percent for the week. The Dow Jones Industrial Average declined of 6.9 percent, while the S&P 500 lost 7.1 percent.

For the week, SPDR Technology (XLK) slid 7.93 percent and SPDR Consumer Discretionary (XLY) 8.00 percent.  Facebook’s (FB) privacy scandal expanded and its shares slid 13.25 percent. Facebook’s performance dragged SPDR Communication Services (XLC) lower by 8.42 percent.

Crude oil slipped to a $45 handle on Friday. Natural gas closed the week with a small loss at $3.71 per mmBTU.

iShares MSCI Emerging Markets (EEM) and iShares MSCI EAFE (EFA) saw smaller losses of 1.86 and 3.76 percent. The U.S. Dollar Index fell 0.35 percent on the week.

Interest rates remain steady despite stock market sell-off. iShares 20+ Year Treasury (TLT) gained 2.12 percent on the week. The 10-year Treasury yield rebounded to 2.79 percent on Friday after bottoming at 2.75 percent on Thursday.

Earnings were mixed this week. Shares of Nike (NKE) rallied 7.15 percent on Friday after it beat earnings expectations. FedEx (FDX) fell 14.18 percent.

Note: The stock market will close at 1 PM on Monday for Christmas Eve and will close on Christmas Day. Many European markets will also close on December 26.

 

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