Market Performance Summary

Source: www.YCharts.com

Notable Market Headlines

Investors in stocks have various headlines to consider including the on again off again reports of a trade deal with China. Any news on this front certainly is moving the price of stocks that would be directly impacted by a deal or lack thereof but, overall, volatility is hovering around all-time lowers as illustrated in the below graph.

Source:www.YahooFinance.com

It’s important to note about this graph of market volatility that low volatility today does not guarantee low volatility tomorrow as spikes seem to come quickly and unexpectedly.

Volatility was low for the week with the change in the S&P 500 on any given day ranging between a very tight -0.38% and +0.22%. At the close of the week this measure of large U.S. stocks was lower by -0.3% but is still just off its record highs and up +26.2% for the year. The tech heavy NASDAQ Composite was off a similar amount while the Dow Jones Industrials slipped -0.5%.

Small U.S. stocks continue to generally lag behind large stocks with small stocks down -0.4% for the week. They are higher by an impressive +19.3% year-to-date but well shy of the year’s gains for large stocks.

International stocks were lower as well with developed country stocks -0.5%. Japan’s market weathered the best down just -0.4% while Australia’s declined -1.3%. Emerging markets dropped -0.6%. There were though notable gains for both Hong Kong and China’s markets recovering a portion of the relatively sharp drops in the prior week.

All of the alternative asset classes were lower with the year’s best performer, real estate, falling the most this week down -1.4%. Even after this drop these stocks remain higher in 2019 by +21.3%. Gold and Commodities were lower as well but by lessor amounts, down -0.3% and -0.2% respectively.

Bonds were the only major asset class moving higher this week gaining +0.4%. The yield on the benchmark 10-year U.S. Treasury inched lower to 1.779% from 1.833% the week before.

Stock Highlights

Target (TGT), a leading American general merchandise retailer with 1,844 stores as of fiscal 2018, reported better than expected numbers for the most recent quarter propelling its stock higher. Revenue climbed to $18.67 billion, continuing a string now of many quarters of growth as illustrated in the accompany graph, with earnings per share of $1.36 topping analyst estimates. Same stores sales grew by +4.5% of which 1.7% of this growth was from digital sales. Management is optimistic about the holiday shopping season giving more than one Wall Street analyst the confidence to raise their price target on the stock. All of this was good for shareholders with the stock jumping +12.9% for the week and higher by a huge +92.2% year-to-date.

Source: www.YCharts.com

The news was not all good for all retailers though with shares of both Kohl’s (KSS) and Macy’s (M) moving sharply lower. Kohl’s reported sales and earnings that both fell short of expectations impacted partially by its relationship with online giant Amazon (AMZN) allowing Amazon shoppers to return merchandise to Kohl’s stores. The recent quarter is unfortunately not an isolated problem as management cut its outlook for the next two quarters as well. Kohl’s stock fell -20.5% for the week and is now down -29.2% for 2019.

Macy’s (M), the struggling department store operator, reported another drop in revenue and earnings for its most recent quarter on a -3.5% drop in same-store sales. Making things worse is a reported data breach that including the theft of customers’ names, addresses, and payment care numbers. Macy’s stock fell -8.4% for the week and has nearly been cut in half year-to-date.

Charles Schwab Corp. (SCHW), a leading discount brokerage firm, is reportedly in talks to buy rival TD Ameritrade (AMTD) for $25 billion. Both companies recently dropped trading commissions to zero for many customers as the entire industry faces continued downward pressure on fees. The combination of these two companies would create a wealth management giant with more than $5 trillion in client assets. This announcement was viewed positively by Wall Street with Schwab’s stock gaining +8.7% for the week and TD Ameritrade’s surging +18.3%.

Several semiconductor and related stocks moved lower this week with highlights in the accompanying table. Much of these moves lower were the result of an analyst at UBS turning negative on the sector saying demand is slowing. In spite of the rough week for these stocks, they all remain sharply higher for the year.

Source: www.YCharts.com

Economic Indicator - Reported

Housing Starts climbed from the prior month’s level and are 8.5% above the same period last year but did come in below economists’ expectations at an annualized 1.314 million homes. The West and Midwest saw the greatest increases while starts were just marginally higher in the South and sharply lower in the Northeast. Permits for new homes were also up 5% from the prior month hitting a level not seen since 2007.

Existing Home Sales also came in above the prior month’s level at 5.46 million homes annually and were 4.6% above year-ago levels. Concerning was the reduction in homes for sale with the inventory falling to just 3.9 months of supply compared to 4.3 months a year ago.

The Leading Economic Indicators, a composite of multiple indicators considered to be predictive of future economic activity, fell in the most recent month by -0.1%. The ongoing trade war with China resulting in slowing manufacturing and difficulty for farmers is being pointed to for the downturn.

Economic Indicators – Upcoming

The following economic data is expected in the coming week: