Market Takes a Breather
It was a mixed week with the Dow Jones Industrial Average (+0.1%), the Nasdaq Composite (+0.1%), and the Russell 2000 (unch) also closing near their unchanged marks. The respective indices are up 6.0%, 8.0%, and 10.0% this month.
The S&P 500 sectors also finished mixed this week. The energy (‐1.5%), consumer staples (‐1.4%), and health care (‐1.3%) sectors underperformed, while the information technology (+1.0%) and real estate (+1.5%) sectors outperformed.
Contributing to lingering growth concerns were discouraging foreign data/outlooks; uncertainty surrounding a U.S‐China trade deal; and a tense government shutdown, which came to a head on Friday with news that there was an agreement on a continuing resolution to fund the government through Feb. 15.
While there was some selling interest during the week, the S&P 500's 50‐day moving average proved to be an important level of technical support. Whenever the S&P 500 fell below its 50‐day moving average, a wave of buyers would lift the index right back up, preventing selling from getting too out of hand.
Also, investors had some reason to remain assured with a round of better‐than‐feared corporate results.
Upbeat earnings reports and/or guidance from chip stocks helped lift the Philadelphia Semiconductor Index (+4.3%) this week, which featured one of its best sessions in nearly 10 years. Intel (INTC), however, was a trading exception as investors responded negatively to its disappointing first quarter revenue and EPS guidance. Intel's issues, though, had little effect on the semiconductor industry, reflecting a belief that they are more company‐specific than anything else.
Airlines, too, pleased investors with their earnings results, namely American Airlines (AAL), Southwest (LUV), and JetBlue (JBLU).
Dow components IBM (IBM), Procter & Gamble (PG), United Technologies (UTX) also provided strong reports and saw their stock prices respond accordingly. Conversely, Johnson & Johnson (JNJ) and Travelers (TRV) underwhelmed.
Separately, a Wall Street Journal report on Friday indicated that the Fed may be getting close to the end of its balance sheet normalization effort. The report provided some comfort for the market, which rode the belief that the Fed's de facto tightening, by way of balance sheet normalization, could soon be over.
U.S. Treasuries finished slightly higher, pushing yields lower. The 2‐yr yield decreased one basis point to 2.60%, and the 10‐yr yield decreased three basis points to 2.75%. The U.S. Dollar Index fell 0.6% to 95.75. WTI crude lost 0.3% to $53.62/bbl.
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2018-73491 (Exp. 05/19)