Market Perspective for January 25, 2019

The Dow Jones Industrial Average gained 0.8 percent on the day, providing a positive return of 0.1 percent for the week. This is now the 5th consecutive week the Dow has increased. The Index was boosted by United Technologies (UTX), International Business Machines (IBM) and Proctor & Gamble (PG). The stocks saw their share prices rise 1.68, 8.20 and 2.38 percent, respectively on the week.

The Nasdaq increased 0.1 percent on the week, while the S&P 500 lost 0.2 percent.

Technology firms Lam Research (LRCX), Texas Instruments (TXN) and Xilinx (XLNX) powered a broad-based rally. iShares PHLX Semiconductor (SOXX) climbed 4.20 percent. The boost from semiconductors helped SPDR Technology (XLK) gain 0.92 percent for the week. The outlier was Intel (INTC), which disappointed investors with its earnings report.

Economic data continues to show healthy expansion. For months we’ve referenced four-decade low unemployment claims. Last week, claims hit their lowest level since November 1969 at 199,000, nearly 20,000 below forecasts. The flash Markit manufacturing and service PMIs show the economy is gaining momentum.

The U.S. government will end its temporary shutdown for three weeks after a short-term deal was reached to ensure numerous federal employees will be paid. If no deal is reached by February 15, the shutdown will resume.

iShares MSCI EAFE (EFA) gained 0.14 percent.  iShares MSCI Emerging Markets (EEM) increased 1.52 percent. Optimism over a potential trade deal and monetary easing in China sent iShares China Large Cap (FXI) higher by 2.01 percent.

The 10-year Treasury yield was flat on the week, finishing at 2.75 percent. The Federal Reserve hinted that its balance sheet reduction might end sooner than expected. More information could be forthcoming at next week’s meeting, although a major announcement may be delayed. Stocks jumped on the report.

Crude oil reached $54 a barrel midweek but ended with a small loss of 0.50 percent. Natural gas pulled back from recent highs as Midwest and Northeast temperatures rose. SPDR Energy (XLE) slipped 1.43 percent.

Colgate-Palmolive (CL), Starbucks (SBUX) and Ford (F) provided earnings. The healthcare sector saw a solid report from Johnson & Johnson (JNJ), but a miss at AbbVie (ABBV) weighed on the healthcare sector.

 

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