It took nearly seven months for the S&P 500 to eclipse its previous high-water mark set earlier this year. The Dow Industrials still needs about 825 points to reach its January 26th peak, while the Nasdaq Composite was able to make a comeback in only a few months, thanks to a strong technology sector. For the past week, the Dow gained a respectable 121 points or nearly 0.5%. The broader-based S&P came close to a 1% gain and the Nasdaq advanced by 1.7%. Small and mid-cap stocks did even better. Transports advanced a half of one percent this week and for the year, rails have outperformed the overall market by about two-times. On a sector-by-sector basis, energy was the star performer for the week with a 2.9% gain, as crude oil prices popped by $2.81 to settle at $68.72/bbl. Technology stocks were strong along with consumer discretionary names, offset by a lagging utility group. Gold recovered from its recent lows with a $30/oz. gain to close on Friday above $1,200.
Wall Street shrugged off several White House legal problems and continued tariff concerns as the trade war with China continues. And the President is not happy with a possible interest rate hike next month. However, minutes from the Federal Reserve’s Open Market Committee meeting in July suggested that the Fed is leaning toward a 0.25% move to counter a strong economy and inflation worries that come along with it. To wit, hefty consumer activity climbed 4% in the past quarter with spending (boosted by lower taxes, steady job gains and higher disposable income) a main contributor. Gains in exports and federal government spending helped, too. Now the issue becomes one of sustainability. And on that front, after several false starts over the past decade, the upturn finally seems firmly grounded.
The next few quarters – and especially the coming several years – will be more challenging for the stock market, as the low-hanging fruit has mostly been picked. I remain on the optimistic side of the argument that the long in the tooth bull market is not close to ending. However, if equities continue to rise along with a strengthening economic backdrop, it will move higher at a slower rate than we have seen over the past few years. Nonetheless, even a meager 4% annual market gain coupled with a 2.5% dividend yield is okay by me.
Here is the answer to last week’s trivia question: Almond Joy and its sister product Mounds were once produced by the Peter Paul Candy Manufacturing Co. founded in 1919. Today, these two iconic candy bars are made by? Mars, Nestle, Hershey or Mondelez International. Answer: The Hershey Co., which purchased the United States rights to the Cadbury-Schweppes chocolate business for $300 million, including the Mounds, Almond Joy and York Peppermint Patty Brands.
Today’s Trivia Question: Accounting for nearly 70% of U.S. freight rail mileage and 90 percent of all railway employees, America’s Class I railroads operate in 44 states across the country and concentrate largely on long-haul intercity traffic. How many Class I freight railroads operate in North America? Five, Seven, Eight or Ten.