Monthly Archives: June 2019

U.S. Market Weekly Summary – Week Ending 06/28/2019

S&P 500 Posts 0.3% Weekly Drop But Ends June Up 6.9% on Month, Up 3.8% for Q2, Marks Best H1 Since 1997

The Standard & Poor’s 500 index slipped 0.3% this week as declines across a number of sectors led by real estate and utilities outweighed gains in financials, materials, industrials and energy.

However, the market benchmark ended June up 6.9% for the month in a significant turnaround from May’s 6.6% drop. This month’s gain has come amid rising hopes for the Federal Reserve to cut interest rates. Those hopes have helped offset investors’ worries about trade issues, which weighed heavily on the market in May.

The index also ended Q2 up 3.8% for the quarter, putting its year-to-date or first-half gain at 17.4%, which marks the S&P 500′s strongest first half of a year since 1997.

Friday’s closing level for the S&P 500 was 2,941.76, which compares with last week’s closing level of 2,950.46. The weekly decline came as all but four of the index’s 11 sectors were in the red this week.

The real-estate sector had the largest percentage drop for the week, down 2.7%, followed by a 2.1% slip in utilities. The four sectors that managed to buck the negative trend this week were financials, up 1.5%; materials, up 1.5%; industrials, up 0.3%; and energy, up 0.2%.

Market Insights 6/27/2019

U.S. equities finished with modest gains after trading in a narrow range as focus on the G-20 summit intensified with uncertainty what a meeting between President Trump and Chinese President Xi over the weekend will bring.

Q1 GDP was unrevised at a 3.1% pace of growth and pending home sales came in a tick above estimates, but jobless claims increased by a larger-than-forecasted amount.

Treasury yields were lower and crude oil prices were mixed, while the U.S. dollar was flat and gold was modestly lower.

The Markets…

The Dow Jones Industrial Average fell 10 points to 26,527

The S&P 500 Index increased 11 points (0.4%) to 2,925

The Nasdaq Composite advanced 58 points (0.7%) to 7,968

In moderate volume, 727 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil inched $0.05 higher to $59.43 per barrel and wholesale gasoline lost $0.02 to $1.91 per gallon

The Bloomberg gold spot price traded $0.66 lower to $1,408.34 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 96.21

Q1 GDP unrevised, jobless claims rise more than expected

The final look (of three) at Q1 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 3.1%, matching the first revision and versus the Bloomberg forecast of an adjustment to a 3.2% expansion. Q4 GDP grew by an unrevised 2.2% rate. Personal consumption was revised to a 0.9% increase, from the second estimate of a 1.3% gain, where it was expected to remain, and compared to the unrevised 2.5% rise seen in Q4.

Weekly initial jobless claims rose by 10,000 to 227,000, compared to estimates of 220,000, with the prior week’s figure being revised higher by 1,000 to 217,000. The four-week moving average rose by 2,250 to 221,250, while continuing claims increased by 22,000 to 1,688,000, north of estimates of 1,665,000.

Pending home sales rose 1.1% month-over-month in May, versus projections of a 1.0% increase, and following the unrevised 1.5% decline registered in April. Sales were 0.8% lower y/y. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

Treasuries were higher, as the yields on the 2-year and 10-year notes, along with the 30-year bond, fell 4 basis points to 1.74%, 2.01% and 2.53%, respectively.

The week’s economic calendar will come to a close tomorrow with personal income and spending, with economists projecting a 0.3% m/m increase in income for May and a 0.5% rise for spending, as well as the final University of Michigan Consumer Sentiment Index, forecasted to tick higher to 98.0 from the preliminary 97.9.

Europe mixed, Asia mostly higher ahead of U.S.-China trade talks

European equities were mixed, with the global markets eyeing the upcoming meeting between the leaders of the U.S. and China at the G-20 summit in Japan that comes amid heightened trade tensions and uncertainty. Eurozone economic confidence for June slipped more than expected, while German consumer price inflation came in a bit hotter than forecasted for this month.

The euro was little changed and the British pound was slightly lower versus the U.S. dollar, while bond yields in the region were mixed.

Stocks in Asia finished mostly higher with the global markets looking to this week’s G-20 meeting in Japan, at which U.S. President Donald Trump and Chinese President Xi are expected to meet. Japanese equities rose, with the yen slipping late in the session, and even as the nation’s m/m retail sales in May rose by a smaller-than-expected amount. Stocks in mainland China and those traded in Hong Kong gained ground, with industrial profits rebounding in May.

Market Insights 6/26/2019

U.S. equities finished mixed, as early gains that came following comments from Treasury Secretary Mnuchin that seemed to lift optimism of a U.S.-China trade deal were tempered by uncertainty over the outcome of the looming meeting between President Trump and Chinese President Xi.

Treasury yields were higher and the U.S. dollar gained modest ground following a mostly better-than-expected read on durable goods orders.

The Markets…

The Dow Jones Industrial Average declined 11 points to 26,537

The S&P 500 Index inched 4 points (0.1%) lower to 2,914

The Nasdaq Composite increased 25 points (0.3%) to 7,910

In moderate volume, 821 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil jumped $1.55 to $59.38 per barrel and wholesale gasoline gained $0.09 to $1.93 per gallon

The Bloomberg gold spot price traded $14.20 lower to $1,409.24 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 96.17

Durable goods orders mostly above estimates, mortgage applications rise

May preliminary durable goods orders dropped 1.3% month-over-month, compared to the Bloomberg estimate of a 0.3% decline and April’s downwardly-revised 2.8% drop. However, ex-transportation, orders were up 0.3% m/m, above forecasts of a 0.1% rise and compared to April’s downwardly-revised 0.1% dip.

The MBA Mortgage Application Index advanced 1.3% last week, following the prior week’s 3.4% decline. The gain came as a 3.2% increase in the Refinance Index more than offset a 0.9% decrease for the Purchase Index. The average 30-year mortgage rate fell 8 basis points to 4.06%.

Treasuries were lower, as the yield on the 2-year note was up 4 bp at 1.77%, the yield on the 10-year note gained 5 bps to 2.04%, and the 30-year bond rate rose 3 bps to 2.56%.

Tomorrow’s economic calendar will be robust and include weekly initial jobless claims, forecasted to increase 4,000 to 220,000, as well as the final read (of three) on Q1 Gross Domestic Product (GDP), with economists projecting a slight upward revision to a 3.2% annualized quarter-over-quarter growth rate from the second read of 3.1%, while personal consumption, the GDP Price Index and the core PCE Index are estimated to be unrevised from their respective prior readings.

Europe and Asia mixed on Fed and trade comments out of U.S.

European equities finished mixed, with comments from U.S. Treasury Secretary Mnuchin seeming to boost optimism of a positive outcome of U.S.-China trade negotiations as the G-20 summit looms later this week where U.S. President Donald Trump and Chinese President Xi are expected to meet. Additionally, the markets digested yesterday’s speech from U.S. Federal Reserve Chairman Jerome Powell that appeared to temper expectations of an imminent rate cut.

The euro was little changed and the British pound dipped versus the U.S. dollar, though bond yields in the region were mostly higher. In economic news, German consumer confidence dipped slightly more than expected for July and French consumer confidence improved more than anticipated for June.

Stocks in Asia finished mixed amid continued caution ahead of the highly-anticipated G-20 meeting in Japan later this week, at which U.S. President Donald Trump and Chinese President Xi are expected to meet, while yesterday’s comments from Fed Chairman Powell appeared to temper elevated expectations of a July rate cut.

Japanese equities declined, even as the yen lost ground late in the day, while Australian securities also traded lower. Mainland Chinese stocks dipped, while those traded in Hong Kong ticked higher in the wake of late-yesterday’s data that showed exports and imports declined by smaller rates than expected in May.

Random Thoughts

Ahead of the Independence Day shortened trading week, investors are hoping to celebrate further progress toward a potential easing of trade tensions with China.

A post-G20 announcement would likely lift the darkening cloud enveloping global economic expansion expectations, as well as S&P 500 EPS growth prospects.

Second-quarter earnings are forecast to fall 1.5%, and then eke out a mere 0.1% advance in Q3, according to consensus wall street estimates.

The full-year estimate now stands at 2.0%, down from 2.5% just two weeks ago. An agreement could be a double-edged sword, however, as it would remove a major uncertainty influencing the Fed to start a new rate-cutting cycle.

Market Insights 6/25/2019

U.S. stocks finished in the red and near the lows of the day, as remarks from today’s speech from Federal Reserve Chairman Jerome Powell dampened a widely anticipated rate cut in July.

The economic calendar didn’t help, as Consumer Confidence and new home sales both fell, and another read on regional manufacturing was soft.

Treasury yields were lower and the U.S. dollar ticked higher, while crude oil prices were mixed, and gold added to its rally.

The Markets…

The Dow Jones Industrial Average fell 179 points (0.7%) to 26,548

The S&P 500 Index declined 28 points (1.0%) to 2,917

The Nasdaq Composite tumbled 121 points (1.5%) to 7,885

In moderate volume, 877 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil ticked $0.07 lower to $57.83 per barrel and wholesale gasoline gained $0.02 to $1.84 per gallon

The Bloomberg gold spot price traded $2.41 higher to $1,422.14 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.2% to 96.17

Consumer Confidence and new home sales fall, Fed Chief speech eyed

The Consumer Confidence Index dropped to 121.5 in June, from May’s revised 131.3 level, below the Bloomberg estimate of 131.0. This was the lowest level since September 2017 as the Present Situation Index and the Expectations Index of business conditions for the next six months both fell month-over-month. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—decreased to 27.6 from the 33.5 level posted in May.

New home sales fell 7.8% m/m in May to an annual rate of 626,000 units versus forecasts calling for 684,000 units and the upwardly-revised 679,000 unit pace in April. The median home price was down 2.7% y/y to $308,000. New home inventory rose to 6.4 months of supply at the current sales pace from 5.9 in April. Sales dropped sharply m/m in the Northeast and West, but rose in the Midwest and South. New home sales are based on contract signings instead of closings.

The main event for the day was likely the afternoon speech from Federal Reserve Chairman Jerome Powell on the economic outlook and monetary policy. Powell’s remarks came following last week’s monetary policy decision that kept rates unchanged but put a rate cut for this year on the table. However the Chairman noted that while uncertainty surrounding trade and global growth have increased, he and his colleagues are “grappling with whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation,” indicating a July rate cut, widely expected by investors and economists, is not a done deal.

Treasuries were higher, as the yield on the 2-year note was 1 basis point lower at 1.73%, and yields on the 10-year note and the 30-year bond decreased 3 bps to 1.99% and 2.52%, respectively.

Europe and Asia mostly lower on geopolitical tensions and G-20 focus

European equities were mostly lower in apparent caution ahead of this week’s much-anticipated G-20 summit in Japan at which U.S. President Donald Trump and Chinese President Xi are expected to hold talks. Also, the markets continue to grapple with escalated geopolitical tensions as the U.S. imposed new sanctions on Iran. The euro and British pound dipped versus the U.S. dollar and bond yields in the region were mostly lower.

Stocks in Asia finished mostly to the downside as the global markets continue to grapple with heightened geopolitical concerns as the U.S. announced new sanctions on Iran and appeared to tread with some caution ahead of this week’s G-20 summit that is expected to see the U.S. and China resume trade talks.

Japanese equities declined, as the yen gained ground late in the session, while those traded in South Korea also traded to the downside. Stocks in mainland China and Hong Kong dropped, with the banking sector seeing solid pressure on the exacerbated geopolitical tensions.

Market Insights 6/24/2019

U.S. equities finished mixed, as investors appeared cautious ahead of the highly-anticipated meeting between President Donald Trump and Chinese President Xi at this week’s G-20 summit.

Global growth concerns were also in focus in the midst of the recent dovishness from global central banks.

Treasury yields were lower and the U.S. dollar added to a recent drop, while crude oil prices were slightly higher.

The Markets…

The Dow Jones Industrial Average rose 9 points to 26,728

The S&P 500 Index ticked 5 points (0.2%) lower to 2,945

The Nasdaq Composite fell 26 points (0.3%) to 8,006

In moderate volume, 799 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil advanced $0.47 to $57.90 per barrel and wholesale gasoline was unchanged at $1.82 per gallon

The Bloomberg gold spot price traded $19.44 higher to $1,419.007 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.2% to 96.02

Regional manufacturing falls, commencing the economic week

The June Dallas Fed Manufacturing Index unexpectedly fell further into a level depicting contraction (a reading below zero), dropping to -12.1 from -5.3 in May, and versus the Bloomberg expectation of a rise to -2.0. This was the lowest level in three years as the company outlook and orders growth rate components of the survey contracted solidly.

Treasuries rose, as the yields on the 2-year and the 10-year notes, along with the 30-year bond dropped 4 basis points to 1.74%, 2.02% and 2.55%, respectively.

The economic calendar heats up tomorrow, with reports slated for release to include Consumer Confidence, forecasted to decline to a level of 131.0 in June from the 134.1 posted in May, as well as new home sales, with economists looking for a 1.6% m/m gain in May to a level of 684,000 units.

Europe mixed on data and trade uncertainty, Asia higher

European equities finished mixed, as the markets digested a profit warning out of the auto sector and another soft economic report, while awaiting this week’s highly-anticipated meeting between U.S. President Donald Trump and Chinese President Xi. This comes as geopolitical tensions are rising amid reports that the U.S. is threatening new sanctions on Iran and as global central banks have turned more dovish.

In economic news, German business expectations continued to deteriorate in June. The euro and the British pound rose versus the U.S. dollar, while bond yields in the region were lower.

Stocks in Asia finished mostly with modest gains amid the backdrop of a dovish global central bank shift, while the markets are awaiting this week’s G-20 summit in Japan, where U.S. and China are expected to hold talks.

Stocks in Japan ticked higher, with the yen dipping late in session, while mainland Chinese equities nudged to the upside. Markets in Hong Kong and Australia gained ground, while South Korean securities finished flat and shares traded in India dipped.

U.S. Economy in a Snapshot

U.S. Economy in a Snapshot is a monthly presentation designed to give you a quick and accessible look at developments in the economy.

Overview of the June 2019 Snapshot

Real consumer spending fell slightly in April. Real expenditures on durable goods and services both fell, while real nondurable goods expenditures rose. Motor vehicle sales were robust in May.

Real business equipment spending declined modestly in Q1 2019, as investment continued to weaken from its pace in 2018. New orders of non-defense capital goods excluding aircraft have been below shipments since December (except in March), suggesting weak near-term momentum.

Housing activity indicators were mixed. Home sales remained solid in April, likely fueled by a substantial decline in mortgage rates over recent months. However, single-family housing starts and permits remain lackluster. A still-strong labor market and lower mortgage rates potentially could provide support to the housing sector.

Payroll growth was muted in May. The unemployment rate, the labor force participation rate and the employment-to-population ratio were all unchanged. Even with a low unemployment rate, some measures of labor compensation growth have flattened in the past few months.

Core PCE inflation firmed a bit in April but remained below the FOMC’s longer-run objective.

U.S. equity indices declined modestly over the past month, amid notable daily volatility. Implied volatility rose slightly. The nominal 10-year Treasury yield and the market-implied expected policy rate path fell significantly. The broad trade-weighted dollar index was little changed. Oil prices fell considerably over the month.

About the New York Fed’s Snapshot

U.S. Economy in a Snapshot, produced by the Research Function of the New York Fed, is designed to provide a tight yet comprehensive overview of current economic and financial developments. This monthly packet presents charts and commentary on a broad range of topics that include labor and financial markets, the behavior of consumers and firms, and the global economy. What’s more, Snapshot aims to cover special topics such as movements in commodity prices, developments in the Second District, or findings from the New York Fed Survey of Consumer Expectations.

Random Thoughts

The market started the year in recovery mode after falling nearly 20% through late 2018 on global economic growth concerns. Yet the realization that the Fed had finished raising rates, and might even start a new rate-cutting cycle, caused investors to think 2019’s equity market return could resemble that of 1995 or 1998.

The S&P responded by soaring 17.5% through April 30, placing it third in YTD returns since WWII. History warned investors that the market typically digested such strong starts in May, but then engineered a reflex rally in June.

Once again, history proved to be a great guide, even though it’s never gospel. So what could the markets do during the rest of the year? Investor optimism has been buoyed by dovish comments from Fed Chair Powell at his most recent press conference.

Yet the traditionally challenging June-through-October period typically threw cold water in the face of such optimism following the five strongest starts to the year, as the S&P 500 fell an average 5.2% and declined in price 80% of the time, versus a gain of 1.1% and 58% frequency of advance for all years since 1945.

Reasons for near-term uncertainty include elevating geopolitical tensions, ongoing trade disputes, global economic growth worries, a potential EPS recession and seasonal hurdles. The following are forecasts of fundamentals that we think will drive equity prices during the remainder of the year.

U.S. Market Weekly Summary – Week Ending 06/21/2019

S&P 500 Posts 2.2% Weekly Gain, Reaches New Intraday High as Energy, Tech Sectors Lead Broad Climb

The Standard & Poor’s 500 index rose 2.2% this week, representing the market benchmark’s third-consecutive weekly gain and sending it to a fresh intra-day record high Friday after a new record closing high was notched Thursday. The S&P 500 ended the week at 2,950.46, up from last Friday’s closing level of 2,886.98 although down slightly from this Thursday’s record closing high of 2,954.18.

Its high of Friday’s session, 2,964.15, marked a fresh intra-day record for the index, which is now up 7.2% for June and up 18% for the year to date as of Friday’s closing level.

The weekly climb was broad, with all of the S&P 500′s sectors in the black versus last Friday. It was led by the energy sector, which jumped 5.2% as crude-oil futures rallied amid Iran’s downing a US surveillance drone Thursday and as geopolitical tensions remained.

The technology sector had the next-largest percentage increase of the week, up 3.3%, as stronger-than-expected quarterly results from Adobe Systems (ADBE) and Oracle (ORCL) helped boosted sentiment in the sector.

The energy sector’s strong gainers this week included Marathon Petroleum (MPC), whose shares climbed 9.8% as the downstream-energy company named Donald Templin its new financial chief, effective July 1.

The technology sector’s advance was led by Adobe, whose shares soared 9.1% this week amid the software company’s report of better-than-expected results for its fiscal Q2. Wedbush said it sees positive implications for the sector from Adobe’s report.

Market Insights 6/21/2019

U.S. equities lost steam late in the day to finish lower, but were able to notch another week of solid gains, as yesterday’s rally on increased optimism of rate cuts on the horizon following the Federal Reserve policy meeting was tempered by soft reads on manufacturing globally, as well as lingering tensions in the Middle East.

Treasury yields rebounded from a recent slide that took the 10-year note to levels not seen since late-2016, and the U.S. dollar fell, while gold added to yesterday’s rally, and crude oil prices were higher.

The Markets…

The Dow Jones Industrial Average shed 34 points (0.1%) to 26,720

The S&P 500 Index ticked 4 points (0.1%) lower to 2,951

The Nasdaq Composite fell 20 points (0.2%) to 8,032

In heavy volume as a result of quadruple-witching, 1.9 billion shares were traded on the NYSE and 2.8 billion shares changed hands on the Nasdaq

WTI crude oil advanced $0.36 to $57.43 per barrel and wholesale gasoline was up $0.06 at $1.82 per gallon

The Bloomberg gold spot price traded $11.92 higher to $1,400.36 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.5% to 96.16

Markets were solidly higher for the week, as the DJIA was up 2.4%, the S&P 500 Index increased 2.2%, and the Nasdaq Composite was 3.0% higher.

Existing home sales rebound

Existing-home sales rebounded in May, increasing 2.5% month-over-month to an annual rate of 5.34 million units, compared to the Bloomberg expectation of a rise to 5.27 million units and April’s upwardly-revised 5.21 million rate. Sales of single-family homes were higher m/m, but down from year-ago levels, while purchases of condominiums and co-ops rose compared to last month and were down y/y. The median existing-home price rose 4.8% from a year ago to $277,700, and marking the 87th straight month of y/y gains. Unsold inventory came in at a 4.3-months pace at the current sales rate, up from 4.2 months a year ago. Sales rose in all regions, with the Northeast seeing the largest increase.

Treasuries were lower, as the yield on the 2-year note rose 2 basis points (bps) to 1.76%, while the yields on the 10-year note and the 30-year bond were up 6 basis points (bps) at 2.06% and 2.59%, respectively. Bonds yields bounced off recent declines, with the 10-year yield touching levels not seen since late-2016, that were exacerbated by Wednesday’s decision by the Federal Open Market Committee (FOMC) not to raise the target for the fed funds rate, while opening the door for the possibility of a near-term rate cut.

Europe and Asia mixed amid weak manufacturing data, geopolitical tension

European equities finished mixed, as increased anxiety over events surrounding the downing of a U.S. drone by Iran yesterday pressured sentiment after it was reported that President Trump authorized strikes against Iran and planes were in the air, but then called off the mission. Some soft economic data exacerbated the negative mood, as the Markit Composite PMI for the Eurozone rose to a seven-month high, courtesy of strength from the services sector, but manufacturing continued to struggle and be a drag on the index, with the component moving further in contraction territory and to a two-month low.

In other economic news, public sector net borrowing in the U.K. fell and was below estimates. The euro was higher versus the U.S. dollar, while the British pound lost ground versus the greenback amid some focus on political events in the nation after a final vote in the battle to become the Conservative Party’s leader and next Prime Minister brought the contest down to the final two candidates, with Brexit hardliner Boris Johnson continuing to garner the largest majority of votes. Bond yields in the region were higher.

Stocks in Asia were mixed following a rally yesterday on the global optimism that ensued following the Federal Reserve’s monetary policy meeting, as tensions in the Middle East continued to linger in the wake of events surrounding the downing of a U.S. drone by Iran. Hopes of a trade deal between the U.S. and China remained, giving mainland Chinese equities a boost, as U.S. Trade Representative Robert Lighthizer is set to meet with Chinese Vice Premier Liu He early next week, ahead of the scheduled meeting between President Trump and Chinese President Xi Jinping at the G-20 summit in Japan.

Japanese equities fell amid strength in the yen, which remains near a 6-month high against the U.S. dollar, and after a read on manufacturing activity fell further into contraction territory and to a three-month low, while department store sales declined and consumer price inflation was marginally softer.

Stocks post another weekly gain courtesy of the Fed

After beginning the week amid palpable caution with the Federal Open Market Committee’s monetary policy meeting looming, U.S. stocks finished the week with solid gains after the FOMC left rates unchanged, but made significant changes to its statement, most notably removing its “patience” language, fueling already-high hopes of rate cuts in the near future. Sentiment was further energized by increased trade deal optimism following a tweet from President Trump that he will meet with Chinese President Xi at next week’s G-20 summit.

Treasury yields continued their descent, further fueled to the downside following the Fed’s monetary policy meeting, with the 10-year yield touching levels not seen since late-2016, but were able to recover somewhat at the end of the week. The U.S. dollar also lost some ground, while crude oil prices jumped amid tensions in the Middle East after Iran shot down a U.S. drone and narrowly avoided strikes authorized by President Trump in the final minutes. All sectors saw gains for the week, led by energy, industrial and information technology stocks.

Next week’s economic calendar will offer a host of key reports, including Consumer Confidence, new home sales, pending home sales, durable goods orders, the final read on Gross Domestic Product, personal income and spending, regional manufacturing reports, and culminating with the final read on the June University of Michigan Consumer Sentiment Index. However, the lion’s share of attention may fall on the highly-anticipated meeting between President Donald Trump and Chinese President Xi Jinping at the G-20 summit in Osaka, Japan late in the week, with hopes of progress on a trade deal between the two nations running high.