Equities edged mostly higher this past week, despite economic data that was less than predicted. But technology stocks continued to lag, although at a lesser pace than last week. The NASDAQ was the sole looser of the major benchmarks, shedding nearly 1% as the tech sector fell another 1.3%, on average. The Dow rose to a new record high, closing at 21,384, positive by 0.5%, while the S&P 500 was virtually flat. Along with technology, basic material stocks were in the red by 1.5%, but interest-sensitive utilities continued to make headway moving higher by 1.6%, despite a Federal Reserve rate hike of one-quarter of one percent. And strangely, the more cyclical industrial sector, which tends to move in the opposite direction of safe-haven utility stocks, wasn’t far behind at 1.2%.
Inflation continued to fall, which is a major Fed indicator for future rate moves, and housing starts fell to a rate that is lower than the same time last year. The central bank also indicated that it is planning to unwind its balance sheet from the quantitative easing put in place during the great-recession. Treasuries jumped on the soft economic data and oil continued to ebb, with a loss of $1.09/bbl. to $44.74. In other news, Amazon.com’s intention to buy Whole Foods Market sent traders to the sell side of the food retailing industry that spilled over to drugstore chains with large grocery businesses in their front-of-store operations. Conservative choice CVS Health, fell $4.59 to $75.46, before recovering to $77.06 on the day. Kroger fell 9% on the news and Walgreen-Boots 5%.
The broader market continues to do reasonably well despite political uncertainty in Washington, rising interest rates and valuations that seem stretched in many cases. Indeed, many of the major averages are near their 52-week highs, a situation that is mystifying Wall Street’s bears. Investors expect things to work out, which explains the market’s high P/Es. And while there are risks at these levels, it’s hard to bet against the tape, so selective accumulation of equities is still in order.
Here is the answer to last week’s trivia question: Delta Air Lines became the second largest air carrier by revenue and the largest by passengers carried with its 2008 acquisition of what airline? Northwest Airlines, Pan American World Airways, U.S. Airways or Trans World Airlines. Answer: Northwest Airlines.
Today’s Trivia Question: Bandag, now part of Japan’s Bridgestone: Operates a nation-wide chain of tire stores, manufactures tires for the aircraft industry, recycles tire and rubber products or provides truck tire re-treading services?