Market Perspective for October 29, 2018

Equities opened the week lower on Monday as technology shares slid. The British government announced a new 2-percent tax on Internet companies with more than 500 million pounds in revenue starting in 2020. While it is not a large sum, it could pave the way for similar taxes on giants such as Google (GOOGL) and Facebook (FB) in other nations.

Weakness in technology pulled the Nasdaq lower by 1.63 percent. The Russell 2000 Index fell only 0.45 percent. SPDR Financials (XLF) gained 0.91 percent and SPDR Healthcare (XLV) rose 0.24 percent, limiting the Dow Jones Industrial Average’s decline to 0.99 percent.

SPDR Utilities (XLU) rose 1.41 percent and SPDR Consumer Staples (XLP) 1.15 percent. Utilities continue to look vulnerable, however, with interest rates holding up well despite market weakness.

iShares MSCI Emerging Markets (EEM) fell 1.73 percent on Monday.  MSCI Brazil (EWZ) fell 3.52 percent following Sunday’s election and lost more than 5 percent from its early morning high. SPDR S&P 500 (SPY) and iShares MSCI EAFE (EFA) declined 0.55 and 0.28 percent, respectively.

Consumer spending increased 0.4 percent in September, meeting expectations. The Bureau of Economic Analysis also reported core inflation was higher by 0.2 percent last month, 0.1 percentage points higher than expected. Manufacturing PMIs and motor vehicle sales will be out later in the week. Friday will bring the October employment report. Economists expect 202,000 new jobs were added and unemployment held steady at 3.7 percent.

Apple (AAPL) will deliver earnings after the bell on Thursday. It has outperformed as Amazon (AMZN), Netflix (NFLX) and Google (GOOGL) have weighed on the Nasdaq 100. Apple is more than 20 percent of SPDR Technology (XLK) and 13 percent of Invesco QQQ (QQQ). Analysts expect $2.78 in earnings, up from $2.07 percent a year ago. Guidance will be important as tech stocks such as Amazon have beaten earnings handily but have sold off on weaker guidance.

Facebook (FB), eBay (EBAY), Amgen (AMGN), Aetna (AET), Allergan (AGN), Cummins (CMI), Anadarko (APC),  Express Scripts (ESRX), Anthem (ANTM), American International Group (AIG), Cigna (CI), ABIOMED (ABMD), Arista Networks (ANET), CBS Corp (CBS), Ball Corp (BLL), Baidu (BIDU), Alibaba (BABA), Exxon Mobil (XOM), Chevron (CVX), AbbVie (ABBV), Duke Energy (DUK) and Seagate Technology (STX) will also report this week.

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