Market Recap week ending 5.24.19
Darren Leavitt, CFA
The markets continued to focus on the potential for more trade conflict between the US and China. Conflicting headlines throughout the week brought more volatility. Cyclical stocks took the brunt of last week’s sell-off. The S&P 500 lost -1.17%, the Dow shed -0.69%, the NASDAQ gave back -2.29%, and the Russell 2000 was lower by -1.41%. A haven bid in treasuries flattened the yield curve. The 2-year note yield fell eight basis points to 2.16% while the 10-year Bond yield is decreasing by fourteen basis point to 2.32%. Gold lost a bit of ground last week losing approximately $4 to close at 1283.65 an Oz. Oil had its worst week in 2019 with a loss of over 6%. WTI closed down $4.11 at $58.62 a barrel. Increased supply data, coupled with global growth concerns, hit the commodity. Interestingly, the losses came despite increased tension between the US and Iran.
The week started with continued concerns that the Chinese would retaliate over the US ban on Huawei doing business with US companies. The fears were further exacerbated by talk that the US would impose similar restrictions on some other Chinese Tech companies. Semiconductor names were especially hard hit as several companies decreased their earnings outlook based on the lost business from Huawei. On Tuesday, the Commerce Department announced that it would provide Huawei with a 90-day license to do business with US companies- the headline put a bid into stocks and almost erased the prior day’s losses. It is clear that investors will continue to focus on trade headlines and are currently fearful of a prolonged trade war and its effects on future earnings. Additionally, trade concerns in Europe continue. UK Prime Minister, Theresa May, announced that she would step down as PM after another failed attempt to negotiate BREXIT.
Fed Minutes from the April meeting offered no real catalyst to the market last week. The minutes did, however, reiterate that the Fed will be patient and will likely be in a hold for the foreseeable future. Economic data last week took a back seat to trade rhetoric, but it is worth mentioning that the preliminary read on European PMI data was weaker than expected and provided another reason to be concerned on global growth.
There were no changes to our models last week.
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