Considering the news flow last week markets were amazingly quiet on continued subdued volatility for investment managers. From a market perspective both the conclusion of the G-7 summit and President Trump’s meeting with North Korea early in the week were both uneventful. The Federal Reserve Open Market Committee (FOMC) did raise short term interest rates by .25% on Wednesday but the move was highly anticipated. The only market moving news was President Trump’s announcement Friday regarding trade tariffs on China. Domestic equity markets traded down on Friday morning subsequent to the news being released as did the yield on the 10-Year Treasury bond.
For the week both the S&P 500 and the Dow Jones Industrial Average were close to flat. The NASDAQ continues its market leadership posting a gain of 1.89% for the week and is now up over 12% for the year. Market leadership continues to be fairly narrow and concentrated in the Technology and Consumer Discretionary sectors. That said, last week both Consumer Staple and Utility stocks (which have underperformed substantially year-to-date) had good showings.
In addition to the strong showing by Nasdaq stocks this year is the continued move up in small capitalization stocks. The Russell 2000 is up over 10% year-to-date propelled by trade war rhetoric and tax reform.
As noted above the FOMC raised rates Wednesday and more importantly signaled that two, not one, more rate hike is probable before year end. Market consensus had been moving in the same direction. Even with two more hikes this year rates will be on the low end of the range from a historical perspective.
The economic calendar includes the U.S. Census Bureau release of May Housing starts on Tuesday. Existing home sales for May are released by the National Association of Realtors Wednesday. Weekly jobless claims are reported Thursday.
Earnings reports continue to be light next week. Q2 earnings season commences in a couple of weeks, we are about to enter a period of Q2 earnings preannouncements.
Tuesday – FedEx and Oracle
Wednesday – Micron Technology
Thursday – Darden Restaurants, Steelcase, Barnes & Noble, and Red Hat
Friday – Blackberry and CarMax
Indices for the week and YTD are as follows:
S & P 500 up .02% for the week; YTD index return is 3.97%
NASDAQ Composite up 1.32% for the week; YTD index return is 12.21%
Dow Jones Industrial Average down .89% for the week; YTD index return is 1.50%
Benchmark 10-year Treasury bond yield stands at 2.92% - down slightly.