Market Perspective for October 18, 2019

Equities extended their winning streak this week. The Russell 2000 Index returned 1.57 percent, the S&P 500 Index 0.56 percent and the Nasdaq 0.43 percent.

Healthcare was the best performing sector, followed by financials and consumer discretionary. SPDR Healthcare (XLV) climbed 2.03 percent, SPDR Financials 1.57 percent and SPDR Consumer Discretionary (XLY) 1.33 percent on the week. Healthcare providers, specifically drug distributors, boosted the healthcare sector. iShares U.S. Healthcare Providers (IHF) rallied 5.76 percent on the week, with some companies rising double-digits.

Strong bank earnings boosted the financial sector. SPDR S&P Bank (KBE) and SPDR S&P Regional Banking (KRE) advanced 2.18 percent and 2.07 percent, respectively. Shares of JPMorgan (JPM) climbed nearly 4 percent on the week, Bank of America (BAC) more than 5 percent.

The Dow Jones Industrial Average slipped 0.15 percent on negative headlines for Johnson & Johnson (JNJ) and Boeing (BA). JNJ recalled baby powder contaminated by a trace amount of asbestos, well below regulatory limits. Boeing slid after the FAA said it found internal messages suggesting employees misled government regulators investigating the 737 MAX.

Economic data was mixed. Homebuilder confidence spiked to a near 2-year high. Housing starts and building permits came down from August highs. Jobless claims remained near all-time lows adjusted for population.

September retail sales missed with a decline of 0.3 percent. Retail sales ex-autos fell 0.1 percent. This comes a week after the University of Michigan said its advance survey of consumer confidence spiked in October. It’s likely the sales number could be revised.

The Fed’s balance sheet expansion plan lifted yields and sent long-term government bonds lower. Corporate, floating-rate and investment grade bonds rallied. Invesco Senior Loan (BKLN) rallied 0.49 percent, iShares iBoxx High Yield Corporate Bond (HYG) 0.38 percent and Fidelity Corporate Bond 0.27 percent.

The U.S. Dollar Index declined 1.00 percent due to a possible Brexit deal. The British pound advanced 2.20 percent with a vote in Parliament scheduled for Saturday.

iShares MSCI United Kingdom (EWU) climbed 1.12 percent on the week and iShares MSCI EAFE (EFA) returned 1.13 percent. iShares MSCI Emerging Markets (EEM) returned 0.58 percent.

 

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