On the prospects of what turned out to be a tumultuous G-7 meeting over the weekend; a meltdown in Brazil’s stock market; and more speculation of a trade war with China, Canada, Mexico and the European Union, the Dow Industrials delivered a 2.7% gain or 681 points on the week. Go figure. The S&P 500 and the NASDAQ were not as generous, but respective 1.6% and 1.2% advances nonetheless. And virtually all market sectors were in the green, led by telecom stocks (up 3.4%), which have lagged of late. The nation’s utilities, however, were down sharply, giving back over 3% of their value on the expectation of the Federal Reserve’s FMOC meeting on Wednesday, where a .25 percentage point increase in the Fed funds rate is all but certain. What else comes out of the meeting regarding the central bank’s thoughts on future interest rate hikes is still on the table, however.
In the short run, the fragile outlook overseas may again play a key role in our markets. The results of the well-publicized summit in Singapore with Presidents Donald Trump and Kim Jong-un on Tuesday may shake markets further, either favorably or not depending on what transpires between the two unpredictable leaders. As seasoned Wall Street followers are well aware, markets hate uncertainty. There is also speculation that the turmoil in Brazil will spread to other developing economies, although at this time I am still on the positive side of the emerging market ledger. For now, however, the focus should be back on the fundamentals, and that is clearly benefiting investors. In addition to the improvement in employment, we are seeing increasing strength in consumer expenditures as well as in manufacturing and services. This combination is likely to help second-quarter GDP by more than 3%. A similar showing is likely in the second half.
There will be one earning’s report to look at on Thursday for aggressive account holders with a position in electronics manufacturer Jabil, Inc. The company’s third quarter estimate is for $0.45 per share, up sharply from last year’s $0.31. While I don’t know which direction the market will take this week, I do expect volatility. And given the many pressing issues facing investors, any deviation from this uncertain trading pattern in equities is unlikely in the months to come.
Here is the answer to last week’s trivia question: Harley-Davidson was one of the early pioneers of the modern-day motorcycle. It produced its first commercial motorbike in Milwaukee, Wisconsin in what year? 1899, 1905, 1919 or 1924. Answer: Frank from New Jersey got it right. Founded in 1903, Harley’s first successful motorcycle was produced in 1905.
Today’s Trivia Question: Which company is the world’s largest auto manufacturer by revenue? Volkswagen, Daimler, Toyota or General Motors.