Market Perspective for May 11, 2018

Equities rallied strongly this week, led by a 2.68-percent gain in the Nasdaq. SPDR Financials (XLF) advanced 3.67 percent, while SPDR Utilities (XLU) retreated 2.17 percent. The 10-year Treasury yield traded above 3 percent on Wednesday before finishing the week at 2.97 percent.

Energy was the best performing sector this week after President Trump announced the United States would exit the Iran nuclear deal, paving the way for new sanctions. West Texas Intermediate crude touched $72 a barrel in Thursday trading before settling back. SPDR Energy (XLE) gained 3.90 percent. Technology and industrials were also strong. SPDR Industrials (XLI) and Technology (XLK) rallied 3.39 and 3.37 percent. iShares U.S. Aerospace & Defense (IAT) climbed 4.35 percent.

The National Federation of Independent Business’ small business confidence index for April reflected increasing optimism. The Job Openings and Labor Turnover Survey reported 6.6 million job openings in March, a substantial increase of 0.5 million from February.

Consumer confidence held steady in early May according to the University of Michigan survey. Consumers’ assessment of current conditions dipped slightly but were offset by rising expectations. Initial claims for unemployment held near four-decade lows at 211,000. The 4-week moving average of initial claims is at a 39-year low.

Consumer and producer inflation rose less than expected in April, lifting stocks midweek. Strong employment data lifted the odds of a fourth rate hike in the futures market from 44 to 47 percent. 

The U.S. Dollar Index was flat on the week after hitting a new high for 2018. The index has gained more than 3 percent in the past three weeks. Argentina accepted an IMF bailout this week, but the peso resumed its slide on Friday.

Investors sold $3.7 billion of emerging-market funds over the past week, the most since the end of 2016.  Global X MSCI Argentina (ARGT) fell 3.55 percent, iShares MSCI Turkey (TUR) 2.84 percent.

SPDR S&P 500 (SPY) advanced 2.57 percent on the week, iShares MSCI EAFE (EFA) 1.20 percent and iShares MSCI Emerging Markets (EEM) 2.09 percent.

Disney (DIS) rallied this week after strong earnings. Comic book movies helped drive results. SPDR Consumer Discretionary (XLY) gained 0.84 percent.

Anheuser-Busch (BUD) wasn’t the medicine the consumer staples sector was looking for. The brewer missed first quarter earnings forecasts even as global sales beat expectations. Shares fell 2.44 percent on the week, SPDR Consumer Staples (XLP) slid 0.36 percent.

The other big earnings report came from chipmaker Nvidia (NVDA). Shares gained 6.53 percent this week and helped pull iShares PHLX Semiconductors (SOXX) higher by 4.22 percent. Even though the company crushed earnings and revenue forecasts, shares declined from their highs on the week after management forecast a large decline in cryptocurrency miner demand.

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