During the holiday-shortened week, the Dow rose three of the four days, gaining momentum on Thursday and Friday with an advance of 282 points. For the week, the average was up about three-quarters of one percent, but the broader S&P 500 was higher by more than 1.5% and the Nasdaq by 2.37%. Smaller cap stocks did even better with gains in the 3% range. And except for a small loss for oil and gas stocks, all market sectors were in the green led by health care and technology, stronger by 3% and 2.6%, respectively. Income favorites utility and telecom stocks were also nicely higher.
Traders shrugged of tariff concerns and focused on the economy with an above-consensus 213,000 jobs created in June despite a rise in the unemployment rate to 4%, as more people entered the workforce. West Texas crude edged down to settle at $73.79 and the ten-year Treasury yield fell to 2.831% after eclipsing 3% in May. The first quarter GDP figure was revised down to 2%, but higher growth in the second and third quarters looks very promising. Earnings season will begin shortly and, here again, the news looks good with profits for the S&P 500 companies targeted to rise 20% from a year ago. The Federal Reserve should hold interest rates steady at their next meeting later this month, but international strains from an escalation in the trade war may dampen Wall Street enthusiasm.
The market has been all over the map lately, with any rally met by sellers seeking to lock in profits. For the year so far, the Dow is negative by about 1%, but the S&P 500 is up 3.2% and the Nasdaq Composite Index is up over 11%. Equities are still overvalued based on historical norms and replete with uncertainty, yet still promising based on the fundamentals. This back and forth is likely to persist for a while, with stocks figuring to continue benefiting from a strong economy and accelerating profit growth, but likely to be held in check by vexing trade issues and uncertain White House policies. As for earnings, we will hear from Delta Air Lines on Thursday, which should have finished the second quarter eight cents higher than last year at $1.72 per share and on Friday, JPMorgan Chase reports with a Street per share estimate of $2.22 vs. $1.71.
Here is the answer to last week’s trivia question: Which is the largest publicly held corporation based in Idaho? Boise-Cascade, Micron Technology, Coeur Mining or Zion Bancorporation. Answer: Micron Technology.
Today’s Trivia Question: The ice cream shop business of Berkshire Hathaway is? Ben & Jerry’s, Carvel, Baskin-Robbins or Dairy Queen.