Market Perspective for May 25, 2018

The Nasdaq led equities higher over the past week. Technology gained 1.08 percent this week. SPDR Technology (XLK) advanced 1.26 percent and SPDR Consumer Discretionary (XLY) rose 1.21 percent.

Utilities led S&P 500 sector performance.  A dip in interest rates generated a strong rally in rate-sensitive shares. SPDR Utilities (XLU) climbed 3.08 percent. SPDR Real Estate (XLRE) returned 2.06 percent.

iShares Semiconductors (SOXX) gained 3.35 percent on the week. Qualcomm (QCOM) and Intel (INTC) both advanced more than 3 percent. iShares U.S. Aerospace & Defense (ITA) rallied 1.07 percent.

Oil prices finally hit resistance this week and weighed heavily on the energy sector. Crude oil touched $73 a barrel on Tuesday and ended the week at $67. The dip should lower gasoline prices, although gas stations may wait until after Memorial Day weekend to pass any savings on to drivers. The drop in oil prices this week was the first meaningful decline in 7 weeks. Crude oil has risen 17 percent this year. SPDR Energy (XLE) slipped 4.57 percent on the week.

New home sales hit an annualized pace of 662,000 in April. Existing home sales showed similar strength. Weekly jobless claims hit 234,000 last week, slightly higher than in recent weeks, but still near 4-decade lows.

Flash PMIs showed U.S. manufacturing and service sector strength in May, but there was some easing in Europe, lifting the dollar against the euro.

The U.S. Dollar Index broke through resistance levels this week and rallied towards a 7-month high following foreign currency weakness.

The euro fell 1 percent due to political instability in Italy and Spain. iShares MSCI Italy (EWI) and Spain (EWP) both fell more than 4 percent on the week. WisdomTree Europe Hedged Equity (HEDJ) declined 0.60 percent, while the unhedged iShares MSCI EMU Index (EZU) slid 1.92percent.

Emerging-market currencies rebounded broadly this week. iShares MSCI Emerging Markets (EEM) gained 0.72 percent.

SPDR S&P Retail (XRT) returned 0.32 percent this week. Lowe’s (LOW) climbed double-digits after reporting earnings. TJX Companies (TJX), Advance Auto Parts (AAP) and Autozone (AZO) were among the winners, while Target (TGT) and Best Buy (BBY) lagged.

 

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