Weekly Market Commentary

Market Recap for the Week ending 7/19/2019

-Darren Leavitt, CFA

Despite a relatively good start to  2nd quarter earnings season, the major indices retreated last week.  Part of the pullback was likely due to the realization that a 50 basis point cut is not likely at the end of the month and also partly due to a severe move down in oil, which hit the energy sector hard last week.  The S&P 500 and NASDAQ shed -1.2%, while the Dow gave up -0.7%, and the Russell 2000 lost -1.4%.  Treasuries were slightly bid during the week.  The 2-year note yield lost 2 basis points to close at 1.82% while the 10-year bond yield lost 3 basis points to close at 2.05%.  Gold gained nearly $20 on the week and closed at $1426.45 an Oz.  As I mentioned, Oil was hammered last week losing -7.5% and closing at $55.66 a barrel.  There were no changes to the models last week.

Earnings started off in earnest last week with the major banks reporting better than expected results.  Transports started the week off on solid footing with trucking companies posting nice results, however, CSX surprised to the downside, and the results sent the whole sector down.  Later in the week, KSU, UNP, and results from some airlines helped to right the ship.  Microsoft posted solid results while Netflix was hammered losing nearly 13% after it missed the mark.  Stay tuned; earnings will be in focus over the next several weeks.

Investors received more positive news on the economic front last week.  Retail sales came in better than expected, and the Philadelphia Fed Index was much better than expected.  The positive data squashed hopes of a 50 basis point cut later in the month.  Separately,  a news report from the WSJ last week suggested that a 25 basis point cut was already a done deal at the Fed.  The market has priced in the 25 basis point scenario, and the pullback seemed appropriate given the move we have seen over the last month and a half.

Oil and the energy complex had a tough week.  Tensions between Iran and the US came down a bit as the two sides’ echoed hopes of a peaceful agreement.  Additionally, there were no real supply disruptions as a result of Tropical Storm Barry rolling through the Gulf which had bid oil up in the prior week.  The nearly -8% loss in WTI hurt the broader energy complex- the XLE lost -1.72% for the week.

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