Markets shrug off encouraging news

07/01/19

  • US hints at trade progress with China, Q1 GDP unrevised at 3.1%
  • Oil, gold surge after Iran shoots down US drone
  • This week: Jobless claims, manufacturing data, markets closed July 4

After climbing to record highs, the US equity markets took a breather last week, despite encouraging news on the trade front and evidence of decent economic growth.

S&P 500 (SPX), 4/15/19–6/28/19. S&P 500 (SPX) price chart. A pullback after the peak.

Source: Power E*TRADE


 

Commodities traders were smiling, though, after precious metals and crude oil surged on continued tensions between the US and Iran. In fact, on Tuesday gold futures topped $1,440 per ounce—their highest level since 2013.

Investors hoping for a big rate cut in July were disappointed after comments by St. Louis Fed President James Bullard and Fed Chairman Jerome Powell seemed to imply that rates cuts might not be as large, or happen as soon, as many investors were anticipating. The final estimate for Q1 GDP came in unrevised at 3.1%, although many economists believe growth will moderate in the second quarter.

As world leaders prepared to gather on Friday for the G20 summit, Treasury Secretary Steve Mnuchin said the US and China are “about 90% of the way” toward a trade agreement with a path toward a resolution. US officials also dropped hints that they could delay imposing tariffs on Chinese goods.

Perhaps because investors have grown accustomed to unrealized trade promises, the Dow 30 Industrials pulled back through much of the week even as the S&P 500 broke a four-day losing streak on Thursday. Tech stocks fared better, with the Nasdaq 100 gaining more than 3.5% on the week.

US stock index performance table for week ending 6/28/19. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector breakdown: The strongest S&P 500 sectors last week were materials (1.47%), financials (1.47%) and industrials (0.30%). The weakest sectors were real estate (-2.73%), utilities (-2.12%), and health care (-1.17%).

Power moves: The week began with some big moves by tech provider PCM (PCMI), which rallied 43% to $34.84 on Monday, while AbbVie (ABBV) fell -16.25% to $65.70 after announcing it was acquiring Allergan (AGN), which jumped +25.36% to $162.43.

On Friday, Highpower International (HPJ), which makes rechargeable batteries, agreed to be acquired by a private consortium, causing shares to surge 39% to $4.20.

Futures action: Commodities had a big week, with August WTI crude oil (CLQ9) surging through mid-week on news that US crude oil supplies fell by nearly 13 million barrels. Gasoline inventories were also down by 1 million barrels. Meantime, August gold (GCQ9) topped $1,440 per ounce on Tuesday—its highest level since 2013.

Coming this week

Monday: PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending

Tuesday: S&P Eurozone PPI

Wednesday: International Trade, PMI Services Index, Factory Orders, ISM Non-Manufacturing Index

Thursday: Fourth of July holiday

Friday: Employment report

Earnings this week include:

●Monday: Motorcar Parts of America (MPAA)

●Tuesday: Acuity Brands (AYI), Simply Good Foods (SMPL)

●Wednesday: International Speedway (ISCA))              

Go to the E*TRADE market calendar (logon required) for an up-to-date earnings schedule and a complete list of splits, dividends, IPOs, and economic reports. The Active Trader Commentary also lists earnings announcements, IPOs and economic report times each morning.

Word on the Street

Just sitting here today, I think 50 basis points would be overdone.

St. Louis Federal Reserve Bank President James Bullard commenting on potential interest rate cuts in July.

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