Market Recap Week ending 2/22/19
-Darren Leavitt, CFA
The markets were relatively quiet last week as investors waited for any news stemming from the ongoing US-China trade negotiations. Investors were also treated to a full dose of Fed rhetoric along with the FOMC minutes from last month’s meeting. Additionally, the last bit of corporate earnings continued to roll in with some notable movers and global economic data for the week was somewhat disappointing. The holiday-shortened week saw the Dow forge its ninth straight weekly gain, something not seen since the mid-’90s. The Dow and S&P 500 increased by 0.6%, the NASDAQ gained 0.7%, and the Russell 2000 continued its recent outperformance adding 1.3%. The yield curve steepened slightly with the 2-year note losing 4 basis points to yield 2.48% while the 10-year bond lost 1 basis point to yield 2.66%. Gold gained $10 for the week, closing at 1332 and Oz. Oil increased by ~$1.75 and finished the week at $57.25. There were no changes to our models last week.
Investors continued to keep watch on trade negotiations between the US and China. It appears some progress was made last week and markets were encouraged that the negotiations were extended for an additional couple of days. However, details remain elusive. Trump did announce that it was likely that he and his counterpart Xi would meet later in March and continued to suggest that the March 2nd deadline could be extended. Separately, the markets were somewhat discouraged by Trump’s assessment of the ongoing trade negotiations with the EU. And finally, it appears Prime Minister, May, will be seeking a 3-month extension on the BREXIT deadline to continue negotiations.
There was very little reaction to the FOMC minutes as they echoed pretty much what we have been hearing from the Fed over the last couple of months. Investors also heard from a number of different governors last week which also yield very little in terms of new news. Fed President J Powell will be in front on Congress this week for his semiannual monetary policy testimony.
On the corporate front, Walmart had an outstanding quarter and blasted higher on its earnings report. Interestingly, the report contradicted last week’s horrific retail sales figure and provided some cover for the consumer discretionary sector. On the other hand, consumer staple, Heinz, blew up on bad earnings, a dividend cut, and the announcement that the SEC was looking into their books. The stock lost nearly a third of its value on Friday.
Global economic data announced last week was disappointing. German and South Korean PMI’s were both weaker than expected. This week we will get Chinese and European Union PMI figures. In the US the Philadelphia Fed index was notably weaker than expected- it came in at -4.1 versus a consensus of 14. The index saw significant declines in all of its components. Existing home sales were also disappointing, coming in at 4.94M versus a consensus of 5.05M. Leading Indicators for January were also soft and came in at -0.1% versus an expectation of 0.1%.
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