Market Perspective for July 29, 2019

Equities opened the week mixed. The Dow Jones Industrial Average led the major indexes with a gain of 0.11 percent. The S&P 500 and NASDAQ declined 0.16 and 0.44 percent, respectively.

Real estate and utilities both increased on Monday ahead of a potential 25 basis point rate cut from the Federal Reserve. SPDR Utilities (XLU) and SPDR Real Estate (XLRE) climbed 0.52 percent and 0.38 percent, respectively. SPDR Healthcare (XLV) was strong as well, returning 0.41 percent.

The Federal Reserve meets this week on Wednesday. Speculators have placed 75 percent odds on a 25 basis point cut with the remainder betting on a 50 basis point cut. Economic data has turned up and the justification for a rate cut here is thin, unless the Fed is concerned about unseen liquidity risks or the potential for a much sharper slowdown in Europe and China. We would not be surprised to see a “hawkish” cut this week, with the policy statement offsetting some of the dovishness of a hike.

The Conference Board and University of Michigan will release their consumer confidence surveys for July this week. Given strong consumer spending data, analysts are looking for upticks in both. July motor vehicle sales are out on Thursday.  Manufacturing PMIs will also be released. Flash PMIs announced last week showed Germany slumping into a deeper manufacturing contraction. Economists expect the U.S. manufacturing sector remains in expansion.

The week concludes with the July unemployment report. Economists forecast 160,000 new jobs, unemployment declining to 3.6 percent and average hourly earnings rising 0.2 percent.

Beyond Meat (BYND), Illumina (ILMN), NXP Semiconductors (NXPI), DISH Network (DISH) and National Oilwell Varco (NOV) kicked off earnings on Monday. Illumina handily beat estimates, though it had guided lower earlier this month. Shares of Beyond Meat slumped after the company said insiders were looking to sell 3 million shares.

Apple (AAPL) headlines Tuesday’s earnings lineup. Also reporting are Pfizer (PFE), Advanced Micro Devices (AMD), Mastercard (MA), Proctor & Gamble (PG), Merck (MRK), Amgen (AMGN), Eli Lilly (LLY), Altria (MO), Celgene (CELG) and Gilead Sciences (GILD).

Wednesday brings Qualcomm (QCOM), Sprint (S), General Electric (GE), Twilio (TWLO), Occidental Petroleum (OXY) and CME Group (CME).

Allergan (AGN) and Verizon (VZ) headline Thursday earnings reports along with Square (SQ), DowDuPont (DWDP), Tableau Software (DATA), Shopify (SHOP), Cigna (CI), General Motors (GM), Etsy (ETSY), Wayfair (W) and Petrobras (PBR).

The week ends with oil giants Exxon (XOM) and Chevron (CVX), LyondellBasell (LYB), Noble energy (NBL), Newell Brands (NWL) and PG&E Corporation (PCG).

 

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