July 15 – July 19 Week in Review
Last week began on a hopeful note for the U.S. equity markets with the major averages reaching record levels. It ended on a sour note however, as the S&P 500 fell 1.2%, the Dow Jones Industrial Average dropped 0.7%, and the Nasdaq Composite lost 1.2%. The small cap Russell 2000 lost 1.4%.
Earnings reports dominated the news last week and they came in mostly better than expected. Many of these stocks reacted positively to the good news. Shares of those companies that didn't at least meet expectations were punished. The lack of positive price action in the market overall suggested that much of the goods news may have already been priced in.
The S&P 500 communication services sector was last week's laggard, as shares of Netflix fell 13% in the two sessions following its earnings report. Disappointing guidance from CSX rattled the transportation sector. The real estate and energy sectors also weighed on the market. Energy stocks were pressured by oil prices, which ended at $55.66 a barrel, losing nearly 8% on the week, although prices stabilized on Friday after news hit that Iran seized a British oil tanker.
The consumer staples and materials sectors were the lone sectors that finished higher last week. The Philadelphia Semiconductor Index was a notable standout, rising 1.3% following positive earnings results and hopeful commentary from Taiwan Semi.
Another round of Fedspeak last week, most notably on Thursday from NY Fed President Williams, affirmed the market's expectations for at least a 25 basis point rate cut at the July 30-31 FOMC meeting. According to a report from The Wall Street Journal on Friday, the Fed is signaling that it will go ahead with a quarter point cut. That shouldn't be too surprising considering that recent economic data doesn’t support a sharp rate cut. Retail sales for June increased 0.4%, and the Philadelphia Fed Index for July climbed to 21.8 from 0.3 in June.
On the trade war front it was reported that the U.S. and China held a phone call and that China had made some token agricultural purchases.
U.S. Treasuries edged higher last week, pushing yields lower across the curve. The 2 year yield declined two basis points to 1.82%, and the 10 year yield declined three basis points to 2.05%. The U.S. Dollar Index advanced 0.3% to 97.15.
July 22 – July 26 Economic Calendar