Market Recap for the Week Ending 1/25/19
-Darren Leavitt, CFA
The markets closed Friday with a nice gain, but for the week the markets were generally flat. The S&P 500 lost 0.2% on the week while the Dow and NASDAQ each gained 0.1%. The Russell 2ooo was unchanged for the week. US Treasuries ended the week with slight gains with the 2-year yield falling to 2.60% and the Ten-year yield falling to 2.75%. Corporate earnings announcements continued to be a focus for investors and on the margin seemed to be better than expected last week. Solid results out of the airlines helped to lift the transports higher. American Airlines, Southwest and JetBlue all beat expectations. Union Pacific also had a nice report.
Similarly, Starbucks reported better than expected top and bottom lines and provided better than expected guidance for 2019. Despite Intel’s disappointing results, the Semiconductor sector had a fantastic week. Texas Instruments, Xilinx, Lam Research and Teradyne all posted nice gains for the week and propelled the Philadelphia Semiconductor Index up over 6% for the week.
While earnings results seemed to stoke some optimism for economic growth, comments from ECB President, Mario Draghi’s tempered that optimism when he acknowledged that the EU economies might continue to need significant stimulus. In Europe, Brexit still looms, and with the hard exit deadline fast approaching, will likely further play on market sentiment. Interestingly, the announcement on Friday that the US Government would be reopened for business was a non-event for the market. However, what did garner some attention and market action was a Wall Street Journal article that suggested that the Fed was close to finishing up the normalization of their balance sheet. This is considerable and a completely different stance than what had been taken by Fed Chairman Powell’s statement from the Fed’s December meeting where he had suggested this policy was on “Autopilot.” There were no changes to our models last week. This is going to be a busy week with a number of heavyweight corporate earnings announcements. The Fed is also scheduled for a rate decision on Wednesday although it is unlikely that there will be any change. The economic calendar is also full, Consumer Confidence, Personal Income, Personal Spending, and Non-Farm Payrolls are scheduled to be announced.
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