It was rather a lackluster week for equities as first quarter earning’s season is now in the rear-view mirror. So, what will traders worry about next? Well, inflation is always a favorite. But, in fact, the latest monthly figures on wage growth and consumer prices argue against that. How about interest rates? The Federal Reserve’s June meeting is around the corner, but – here again – most of the news of two more rate hikes this year is pretty much baked into stock prices. The 10-year Treasury note yielding above 3% is on the list and can’t be taken too lightly. Vexing issues with China trade and North Korea, and heightened tensions with Iran are all likely to affect trading in the days and weeks to come. But investors usually return to the fundamentals before long. And here, with respect to the economy and earnings, the news remains generally supportive.
For the week just ended, the major indexes lost about one-half of one percent. The small-cap Russell 2000, however, managed to gain 1.23%, as tax advantages and the ill effects of tariffs are more favorable for this group. Sector-wise, it was a mixed bag. Energy related names were the clear winners advancing 1.8% as West Texas oil moved above $71/bbl. and Brent crude is closing in on $80. Basic material stocks also did well. On the negative side, consumer staples continue to lag, and utilities gave up about 2% on the week, with the trend for these two groups likely to continue. Technology stocks were also particularly week.
For now, the bulls still hold the upper hand. And that may be slow to change, despite the aforementioned headwinds. Even if the bulls retain the edge, their hold is likely to prove tenuous, especially if interest rates rise much further and growth takes a breather. A well-planned investment strategy with positions in high-quality names and growing dividends still appears to be a reasonable approach at this juncture.
Here is the answer to last week’s trivia question: The price of West Texas crude oil settled on Friday (May 11) at a multi-year high of $70.70/bbl. The recovery of oil has been slow and steady of late since a February 12, 2016 low point of? $28.01, $29.44, $32.16 or $34.50. Answer: $29.44/bbl.
Today’s Trivia Question; Forbes Magazine, one of the nation’s leading businesses and financial publications, was founded by B.C. Forbes in what year? 1917, 1926, 1944 or 1952.