The Week In Review

8/17/18

The S&P 500 advanced 0.3% on Friday, securing a weekly gain of 0.6%, helped by a Wall Street Journal report that Chinese and U.S. negotiators are planning talks to try to end their trade disagreement ahead of multilateral meetings between President Trump and President Xi in November. The Dow added 0.4% on Friday, and the Nasdaq ticked up 0.1%.

Friday's gains were broad-based, with all 11 S&P sectors closing in the green. The industrials (+0.6%), materials (+0.7%), consumer staples (+0.7%), and real estate (+1.0%) sectors were the top performers, while consumer discretionary (+0.1%), financials (+0.2%), and technology (+0.2%) finished at the back of the pack.

Stocks opened roughly flat and stayed largely unchanged until the afternoon when the WSJ report crossed the wires, pushing the market to new highs.

In corporate news, Tesla (TSLA 305.50, -29.95) tumbled 8.9% following a New York Times interview with its CEO, Elon Musk, in which he discussed his personal struggles, calling this past year "the most difficult and painful" of his career. The NYT also reported that some of Tesla's board members are concerned over Mr. Musk's use of Ambien and recreational drugs.

On the earnings front, NVIDIA (NVDA 244.82, -12.62) and Applied Materials (AMAT 43.77, -3.66) tumbled 4.9% and 7.7%, respectively, after they reported worse-than-expected guidance, which overshadowed their better-than-expected earnings. The Philadelphia Semiconductor Index lost 0.7%.

Conversely, Nordstrom (JWN 59.18, +6.90) spiked 13.2% after reporting above-consensus earnings and guidance for FY19, and Deere (DE 140.59, +3.24) climbed 2.4% despite missing bottom-line estimates and issuing below-consensus guidance for the current quarter.

Away from stocks, the Turkish lira lost 3.6% against the U.S. dollar, ending its three-session rebound, and U.S. Treasuries spent most of the day in the green, but finished the session little changed. The yield on the benchmark 10-yr Treasury note finished flat at 2.87%.

Reviewing Friday's economic data, which included July Leading Indicators and the preliminary reading of the University of Michigan Consumer Sentiment Index for August:

  • The Conference Board's Leading Economic Index increased 0.6% in July (Briefing.com consensus +0.5%), and the June reading was left unrevised at +0.5%.
    • The key takeaway from the report is that it points to a sustained pace of economic expansion for the foreseeable future.
  • The preliminary reading of the University of Michigan Consumer Sentiment Index for August slipped to 95.3 (Briefing.com consensus 97.8) from 97.9 in July.
    • The key takeaway from the report is that the overall decline was driven by concerns about the prices of large household durables.

Looking ahead, investors will not receive any economic data on Monday.

  • Nasdaq Composite +13.2% YTD
  • Russell 2000 +10.3% YTD
  • S&P 500 +6.6% YTD
  • Dow Jones Industrial Average +3.8% YTD

Week In Review: Hodgepodge of Headlines Helps Fuel Rebound 

The S&P 500 advanced 0.6% this week -- recouping last week's modest decline -- amid a host of retail earnings, more volatility in the Turkish lira, and another (minor) chapter in the U.S.-China trade war saga. The blue-chip Dow outperformed the S&P 500, rallying 1.4%, but the tech-heavy Nasdaq lagged, losing 0.3%.

Retailers stepped up to the earnings plate this week, with Walmart (WMT), Home Depot (HD), Macy's (M), Nordstrom (JWN), Advance Auto (AAP), and J.C. Penney (JCP) all reporting their quarterly results. The market's reaction to the reports was mixed.

In the session immediately following their respective earnings releases, Walmart spiked 9.3%, Home Depot lost 0.5%, Macy's plunged 16.0%, Nordstrom spiked 13.2%, Advance Auto climbed 7.8%, and J.C. Penney plunged 27.0%. On a related note, the July Retail Sales report came in better-than-expected, showing a month-over-month increase of 0.5% (Briefing.com consensus +0.1%).

Non-retail names reporting earnings this week included Cisco Systems (CSCO), NVIDIA (NVDA), and Deere (DE). Cisco Systems and Deere rallied in the session immediately following their releases, adding 3.0% and 2.4%, respectively, but market-darling NVIDIA tumbled, losing 4.6%, after disappointing guidance overshadowed upbeat results.

In other corporate news, Tesla's (TSLA) chief executive, Elon Musk, attempted to clarify last week's tweet about taking Tesla private, saying that his claim that funding has been secured is based on repeated conversations with Saudi Arabia's sovereign wealth fund. Mr. Musk also did a high-profile interview with The New York Times, in which he discussed his personal struggles, calling this past year "the most difficult and painful" of his career. Tesla shares ended the week lower by 14.1%.

In currencies, the Turkish lira followed up last Friday's 16% plunge with another slide on Monday, touching a new all-time low against the U.S. dollar, but then rebounded for the next three sessions. That streak ended with another tumble on Friday, but the currency still finished with a weekly gain of 6.1%.

On the trade front, reports that the U.S. and China will resume trade talks by the end of the month helped equities rally on Thursday. The talks will mark the first official negotiations since a breakdown two months ago, but it's worth noting that the talks are expected to be between low-level officials. In addition, The Wall Street Journal reported late on Friday that Chinese and U.S. negotiators are planning talks to try to end their trade disagreement ahead of multilateral meetings between President Trump and President Xi in November.

Elsewhere, West Texas Intermediate crude futures tumbled 2.5% to $65.94 per barrel this week, touching a fresh two-month low on Wednesday after the Energy Information Administration's weekly inventory report showed an unexpected build of 6.8 million barrels. The drop in oil prices weighed on the energy group, which finished at the bottom of the sector standings with a loss of 3.6%.

Most S&P 500 sectors finished the week in positive territory, with less-risky, countercyclical groups -- including consumer staples (+3.2%), utilities (+2.5%), and telecom services (+3.7%) -- leading the charge. The top-weighted technology sector underperformed, shedding 0.2%, but remains 2018's top-performing group with a year-to-date gain of 15.6%.

Headlines provided Briefing.com