Market Perspective for July 13, 2018

The Dow Jones Industrial Average and Nasdaq returned 2.30 and 1.79 percent, respectively, this week.  Technology, consumer staples and industrials were the best performing sectors, while utilities lagged due to rising rate hike expectations. Th S&P 500 trailed slightly, gaining nearly 1.50 percent.

SPDR Industrial (XLI) led sector performance with an increase of 2.20 percent. iShares North American Software (IGV) climbed 3.95 percent and SPDR Technology (XLK) increased 2.08 percent this week. SPDR Consumer Discretionary (XLY) gained of 2.08 percent, due to its 20 percent allocation in Amazon (AMZN), which rose 5.99 percent.

Small business optimism remained near all-time highs in June. Job openings slipped to 6.6 million but remained higher than the unemployed population. The quit rate increased to 2.4 percent, a 17-year high, indicating wage inflation could pick up as workers chase better opportunities. Weekly jobless claims fell back near 40-year lows at 214,000.

Earnings season kicked off this week with several large banks reporting. J.P. Morgan (JPM) and Citigroup (C) beat analyst estimates, but Wells Fargo (WFC) fell short. J.P. Morgan (JPM) earned $2.29 per share, 7 cents above the consensus forecast. Earnings rose 26 percent from last year. Citigroup earned $1.63 per share, beating forecasts by 7 cents. Citigroup missed on revenue by a very small amount, a mere $43 million on more than $18 billion.

Wells Fargo analysts were expecting earnings of $1.12 per share; it generated only $0.98 for the quarter. Mortgage banking fees fell 33 percent, non-interest income was stagnant, and expenses remain a concern despite falling this year.

PNC Financial Services (PNC) saw the best return on Friday after reporting 25 percent earnings growth. The bank reported a 3 percent rise in commercial lending, a core business for regional banks. Shares have gained more than 11 percent over the past year.

SPDR Financial (XLF) gained 1.16 percent for the week, while iShares U.S. Broker-Dealers (IAI) advanced 1.20 percent. We are increasingly bullish on financial stocks, especially small and regional banks.  Investors should consider adding SPDR Regional Banking (KRE).

 

0
    0
    Your Cart
    Your cart is emptyReturn to Shop