What the Fed said

  • The S&P 500 climbed above 3,000 for the first time ever amid dovish Fed comments
  • June CPI advanced 0.1% from May, with core CPI up 0.3%
  • This week: Retail sales, housing starts, unemployment claims, and consumer sentiment

When all was said and done, major equity indexes climbed to record highs yet again, but the week didn’t start that way.

Stocks stumbled out the gate, with big names like Boeing (BA) leading the markets lower on Monday. Boeing’s troubles began after Saudi Arabian budget airline Flyadeal canceled a $5.9 billion provisional order and handed it to archrival Airbus.

Stocks limped along until mid-week, when the S&P 500 achieved a milestone by climbing above 3,000 for the first time. That followed initial Congressional testimony from Federal Reserve Chair Jerome Powell hinting at rate cuts in July—a veritable sugar high that continued through Thursday—pushing the Dow and S&P to record highs.

S&P 500 (SPX), 6/01/19–7/12/19. S&P 500 (SPX) price chart. Fed fixation

Source: Power E*TRADE

Q2 earnings season is now underway, which could take some of the focus away from the Fed in the coming week.

Or maybe not.

As the July 30-31 FOMC meeting draws near, it will likely be hard for investors to lose their Fed fixation. Let’s not forget that 3%+ GDP growth and record-high stock prices don’t usually dovetail with rate cuts. But these are not normal times.          

Here’s how the major US indexes performed last week:

US stock index performance table for week ending 7/12/19. 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 energy (2.15%), consumer discretionary (2.14%), and information technology (1.52%). The weakest sectors were health care (-1.43%), materials (-0.82%), and real estate (-0.20%).

Power moves: On Monday, Averum Biotech (ADVM) gained 22.94% to $14.90, while cannabis firm CannTrust Holdings (CTST) fell more than 22% to $3.83 after Ontario officials called its greenhouse facility “noncompliant.” Chinese electric car maker NIO (NIO) gained an additional 5.73% on Tuesday for its sixth-straight gain. Volume was 76.8 million shares, making it one of the most actively traded stocks on US exchanges that day and capping off the best six-day run in its brief history as a public company. Cigna (CI) advanced 9.24% to $175.34 on Thursday after the Trump administration abandoned plans to eliminate drug rebates from government prescription drug plans.

Futures action: August WTI crude oil (CLQ9) rose to a seven-week high early in the week after US crude oil stockpiles fell more than expected and a tropical storm barreled down on the Gulf of Mexico. After starting the week at more than $57/bbl, WTI closed out the week at just over $60/bbl. August gold (GCQ9) was little changed, with safe-haven demand easing off the breakneck pace of two weeks ago. August gold finished the week at around 1,417/ounce.

Coming this week

Last week’s higher-than-expected wholesale and consumer inflation numbers did little to reduce the odds of an interest rate cut later this month. This week the economic picture will be fleshed out in more detail with retail and housing sales figures reported:

Monday: Retail sales, import prices

Wednesday: Housing sales, building permits

Thursday: Unemployment claims

Friday: University of Michigan consumer sentiment

Q2 earnings season kicks into gear with many of the largest financial services firms reporting this week—although they won’t be the only ones. Among the highlights:             

Monday: Citigroup (C)

●Tuesday: Canadian Pacific (CP), JPMorgan Chase (JPM), Goldman Sachs (GS)

Wednesday: Honeywell (HON), Morgan Stanley (MS), UnitedHealth (UNH)

Thursday: Delta Airlines (DAL), Fastenal (FAST)

Friday: American Express (AXP), Manpower (MAN), Schlumberger (SLB)

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

It appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook.

Federal Reserve Chair Jerome Powell in prepared remarks to Congress on Wednesday

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