Most of the news the past few weeks has focused more on geopolitical events than financial. Nonetheless, the market has been quite resilient despite problems in Washington, missile launches by North Korea and terror attacks abroad. OPEC’s decision to extend its six-month production cap by nine months was met with disappointment. While the accord was modestly successful at addressing the global inventory glut, traders hoped for a longer expansion. U.S. crude oil tumbled 5% after the cartel announced their move. While oil prices firmed at week’s end, the West Texas benchmark remains below $50/bbl.
For the week, the S&P 500 and NASDAQ continued to move into record territory with gains of 1.4% and 2.1%, respectively. The Dow finished the week 275 points higher or 1.3% at 21,080, some 35 points from its record high set in March. Except for energy stocks, virtually all other sectors were positive, led by utilities, consumer goods and technology. Transportation stocks were particularly strong, advancing 3.4%, on average.
First quarter GDP growth was revised up to 1.2% with a projected 3% advance in the cards for the current quarter. A rise in household spending, higher incomes, strength in employment, further durability in home building, accelerating increases in industrial production and asset appreciation (from rising home prices and a higher stock market), bode well for a second half expansion in GDP, as well to somewhere in the 2.5% – 3.0% range. A probable rebuilding of inventories should also contribute. With this positive news, so comes higher interest rates, with two or three more hikes likely this year. One should continue to be somewhat cautious regarding the stock market as valuations remain high and stocks seem priced for near perfection. Still, the fundamentals are strong and the bull market should remain alive and well for now.
Markets will be closed tomorrow in observance of Memorial Day. Enjoy the rest of holiday the weekend.
Here is the answer to last week’s trivia question: The largest “pure play” pharmaceutical company by revenue is? Pfizer, Inc., Novartis, Merck or Roche Holdings. Answer: Pfizer, Inc. (Johnson & Johnson has about twice the revenue of Pfizer, but its Jansen Pharmaceutical Unit is smaller than all the other “pure play” drug companies).
Today’s Trivia Question: Eastman Kodak Co., established in 1888, fell into bankruptcy in January 2012. Today, Kodak is? A division of Shutterfly, Inc., privately held by Elliot Management Corp., defunct or publicly traded on the NYSE.