-Darren Leavitt, CFA

US equity indices hit another set of all-time highs in what was a very busy week on Wall Street.  First-quarter earnings season kicked off, with US Banks showing impressive results.  Markets were well bid throughout the week and moved higher despite news that J&J’s Covid vaccine usage was halted due to some adverse effects and that the US will impose more sanctions on Russia.  Investors also got a full plate of economic news that showed robust retail sales and in-line consumer prices.

For the week, the S&P 500 was up 1.4%, the Dow added 1.2%, the NASDAQ increased 1.1%, and the Russell 2000 tacked on 0.9%.  Perhaps the story of the week was in the bond market that was able to dismiss strong economic data and rally.  The 2-year note yield increased one basis point to 0.16%, while the 10-year yield decreased by ten basis points to close at 1.57%.  Gold prices rose 2% or $35.70 to close at $1780.20 an Oz.  Oil prices gained 6% on the week, with WTI prices up $3.95 to close at 63.16 a barrel.

US banks showed an impressive first-quarter.  Goldman Sachs, JP Morgan, Bank of America, Wells Fargo, and Citi all produced better than expected results.  Trading departments had solid results, and lighter than expected loan loss provision use were highlights.  Interestingly most of the banks sold off after their announcements suggesting that much of the good news was already baked into their stock prices.  Weak consumer loan demand tempered the results, but most think this demand will pick up in the second half and that the banks are in the best financial shape in decades.

Blood clot issues caused the CDC and FDA to halt the use of J&J’s Covid vaccine.  The halt will allow doctors and scientists to study the adverse effects and assess if further usage is safe.  The news undoubtedly hurt vaccine sentiment and may curtail the use of J&J’s vaccine. Still, shots continued to go into arms, and Pfizer announced that it would be able to provide more doses than had previously been expected.

An increased Russian military presence along the Ukrainian border has concerned US officials and their European allies.  In response, the Biden administration announced a new set of sanctions against Russia to keep US institutions from buying Ruble-denominated Russian sovereign debt.   The move will likely be met with a countermeasure from the Russians, and any escalation could certainly weigh on financial markets.

Economic news was much better than expected.  The much anticipated CPI print was in line with expectations.  Headline CPI came in at 0.6% or 1.6% on a year over year basis.  Core CPI, which strips out food and energy, also came in line with consensus estimates at 0.3%.  March Retail sales came in at a whopping 9.8%, much better than estimates of 6%.  Initial claims were also much better than expected, coming in at 576k versus 705k.  Continuing claims came in at 3.731 million from 3.727 million in the prior week.

The information in this Market Commentary is for general informational and educational purposes only. Unless otherwise stated, all information and opinion contained in these materials were produced by Foundations Investment Advisers, LLC (“FIA”) and other publicly available sources believed to be accurate and reliable.  No representations are made by FIA or its affiliates as to the informational accuracy or completeness.  All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. No party, including but not limited to, FIA and its affiliates, assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

The views and opinions expressed are those of the authors do not necessarily reflect the official policy or position of FIA or its affiliates.  Information presented is believed to be current, but may change at any time and without notice.  It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

Market Recap week ending 7/5/2019

-Darren Leavitt, CFA

I hope everyone had a great and memorable 4th of July holiday.  Despite the holiday-shortened week, Markets were quite busy.   Markets surged on Monday in reaction to the outcome of the US/China trade talks at the G20 summit.  The two sides decided to continue discussions and hold off on any new tariffs.  However, the week’s initial pop was tempered with weak PMI data from Japan, China, and the Eurozone.  The S&P 500 gained 1.65% on the week while the Dow, NASDAQ and Russell 2000 added 1.21%, 1.94%, and 0.58%, respectively.  The yield curve flattened out a bit last week as the 2-year yield gained 13 basis points to close at 1.87% and the 10-year yield gained 5 basis points to close at 2.05%.  Gold was off $14 to close at $1400. Oil closed at $57.40 a barrel down just under a dollar from the prior weeks close.

As expected, the US and China agreed to continue negotiations and halt any further tariffs.  The news encouraged Markets higher, especially in the more cyclical sectors.  Semiconductors soared on news that the US would rescind some of the restrictions placed on doing business with Huawei.  This single concession seemed to validate hopes for further progress in the negotiations.  However, on Friday, headlines suggested that China will insist that all current tariffs be removed if an accord is to be reached.

Weak international economic data persisted last week.  Notably, PMI figures in Japan, the Eurozone, and China remained in contraction.  Japan’s PMI came in at 49.3 down from the prior month’s reading of 49.5.  In Europe, manufacturing came in at 47.6 down from May’s reading of 47.8.  Moreover, in China, the PMI figure was unchanged at 49.4.  Exports out of South Korea also looked terrible as did factory data out of Germany.  In the US, the ISM manufacturing reading also declined on a month over month basis, but the reading continued to signal expansion.  The figure came in at 51.7 down from the prior months reading of 52.1.  The US Employment Situation Report rattled Markets on Friday.  The headline Non-Farm Payrolls number came in much better than expected- 224k versus the consensus estimate of 160K.  The Unemployment number came in slightly worse than expected at 3.7% versus the consensus estimate of 3.6%.  Average Hourly earnings came in up 0.2% versus the estimate of 0.3% and is up 3.1% over the last 12 months.  Fed Fund futures erased any chance of a 50 basis point cut in July after the report was released.  Currently, Fed Fund futures indicate a 100% probability of a 25 basis point cut in July.

Of note, Christine Lagard, the current IMF president, was nominated to become the next European Central Bank President.  If confirmed she will succeed current President Mario Draghi.  Lagard is not an economist rather a politician.  While at the IMF, she has supported the use of quantitative easing and is likely to support the current dovish policy tones out of the ECB.

The information in this Market Commentary is for general informational and educational purposes only. Unless otherwise stated, all information and opinion contained in these materials were produced by Foundations Investment Advisers, LLC (“FIA”) and other publicly available sources believed to be accurate and reliable.  No representations are made by FIA or its affiliates as to the informational accuracy or completeness.  All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. No party, including but not limited to, FIA and its affiliates, assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

The views and opinions expressed are those of the authors do not necessarily reflect the official policy or position of FIA or its affiliates.  Information presented is believed to be current, but may change at any time and without notice.  It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to Market conditions. Due to rapidly changing Market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.
Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.