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Market Commentary - Week Ending 4/6/2019


  • Stocks rallied around the world posting impressive gains
  • The price of oil hit a new 2019 high
  • The U.S. employment report showed a strong rebound in March

Market Performance Summary

Source: www.YCharts.com

Notable Market Headlines

Investors were clearly in the mood to take on risk this week as small stocks (higher risk) outperformed large stocks, emerging markets (higher risk) outperformed developed markets, and growth stocks (higher risk) outperformed value stocks. Hopes of easing trade tensions with China and other factors clearly influenced investors. One concern that still seems to be lingering though is the expectation of a slowdown in earnings growth with companies scheduled to start reporting this week.

At the close of the week, large U.S. stocks as measured by the S&P 500 were higher by +2.2% while the Dow Jones Industrials lagged behind marginally with a gain of +1.9% and the tech-heavy NASDAQ continued to lead this bull market higher rallying +2.7%. Financials were among the best performing in front of earnings reports expected from some of the biggest this week. Small U.S. stocks had a great week gaining +2.8%. Year-to-date they are now outpacing large stocks with a gain of +17.5% as compared to +15.5% for large stocks.

International stocks rallied as well with developed market stocks gaining +2.1% lead by Germany’s market jumping +3.8% and Spain’s higher by +3.4%. Emerging markets performed even better surging +3.5% with the largest of the emerging markets, China, up +3.6%. Year-to-date emerging markets are now higher than developed markets with a gain of +13.7% versus +12.7% for developed markets.

Non-traditional asset classes were mixed for the week with Commodities, fueled by the price of oil, doing very well with a gain of +3.3%. Oil prices moving higher can cause fears of inflation although there are no signs of such in the economy today. Real estate stocks gained +1.1% and are higher by +16.3% for the year while gold was flat for the week.

Bond prices inched lower by -0.3% but are still meaningfully higher for the year by +1.9%. The lower prices, and higher yields, were impacted somewhat by the strong employment report. The yield on the benchmark U.S. 10-year Treasury bond closed 2.494% which was higher for the week but still well of the highs earlier in the year.

Stock Highlights

Wynn Resorts (WYNN), a U.S. based casino giant, saw its stock rally +18.1% for the week making it the best performing among the 500 stocks in the S&P 500. It was a strong and steady climb all week as investors reacted to a report that gambling revenue in the Chinese territory of Macau, one of the biggest gambling regions in the world, slipped -0.4% in March compared to the same period last year. There is optimism that this demonstrates the resilience of this market in spite of fears of an economic slowdown in China. Wynn has a two-tower property in Macau. As the accompany graph shows, Wynn’s stock has experienced big long-term rallies and falls. It is up +42.5% year-to-date.

Source: www.YahooFinance.com

Advanced Micro Devices (AMD), a semiconductor company with the majority of its revenues coming from computer chips, is among the hottest in the industry in 2019. This week the stock surged +13.6% following positive comments from Wall Street analysts, signs of strong order activity, and optimism that there could be a trade deal with China. As the accompany graph shows, revenue growth slowed in the two most recent quarters spooking investors. The stock dropped by about 50% from its September 2018 high to December low and has now rallied +57.0% in 2019!

Source: www.YCharts.com

Harley-Davidson (HOG), the iconic motorcycle manufacturer, has been struggling for several years. This week it was reported that the company’s union rejected their contract offer. In an unrelated report credit rating agency Fitch Ratings downgraded its outlook for the company to negative from stable on concerns of declining demand and tariffs. Surprisingly this stock was among the best performers this week gaining +13.0% and now higher by +18.1% for the year.

Walgreens Boots Alliance (WBA), the nation’s largest retail pharmacy with approximately 10,000 drugstores throughout the United States, was the worst performing stock among the S&P 500 this week. The company disappointed investors reporting quarterly results showing net income down -14%. The company went on to …
-13.6% -20.0%

Economic Indicator - Reported

The March Employment Report came in strong rebounding from the much weaker than expected February report. In March the economy added 196,000 new jobs as compared to the upwardly revised February report of only 33,000. The healthcare sector added 49,000 alone, the strongest sector of the economy, with professional and technical firms coming in second with 34,000 new jobs. The unemployment rate remained near its 50-year low of 3.8%.

Retails sales disappointed dropping -0.2% for the month of February as compared to economists’ forecast of +0.3%. This February disappointment was offset by the much higher revised January growth to +0.7% as compared to the originally reported +0.2%. Hopefully in March we will see renewed strength here as we did in the March employment report.

Durable Goods Orders, orders for items that are not immediately consumed and have a longer lifespan, fell by -1.6% in February. When removing the volatile transportation sector from the data, orders actually increased by +0.1% due to a -31% plunge in orders for commercial aircrafts.

Economic Indicators – Upcoming

The following economic data is expected in the coming week:

  • The Consumer Price Index (CPI), a measure of retail inflation, is expected to have increased by +0.4% in the most recent month while the Producer Price Index (PPI) is expected to show a gain of +0.3%.
  • Consumer Sentiment, a survey of at least 500 households to assess near-term consumer attitudes on the business climate, personal finances, and spending, is expected to remain strong.

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