Once again, the S&P 500 and the Nasdaq Composite recorded new all-time highs with respective weekly advances of 0.8% and 2.1%. The Dow still has some room to run to match its January high, but managed to close the week with a 174-point gain of 0.7%. Transportation stocks took a bit of a breather posting a small advance as crude oil moved ahead about $1.00/bbl. and is once again closing in on $70. Technology was the clear winner with a 2.2% average advance, followed by consumer discretionary and health care stocks. Telecom names, however, were weak. In all, it was an impressive showing for the final months of the summer. As we head into September – an historical weak month for equities – we will have to keep an eye on finalizing a NAFTA deal with Canada and agree on fair outcomes with China and the European Union. The U.S. and Mexico have reached a preliminary agreement, but negotiations will need to include our neighbor to the north to pass a Congressional vote.
Elsewhere, the economy continues to hum along, as it likely reached its high point for 2018 in terms of growth. The first half of the year was supported by strength in consumer spending, exports and non-residential construction as GDP jumped 4.2% in the second quarter. Consumer confidence remains strong and the Conference Board reported the indicator rose to it highest point since 2000. Consumer spending was robust, but the strong economy has Fed watchers on edge as inflation is at a 2% annual rate. On Friday we will get the Labor Department’s report for August with an expectation of 187,000 new jobs; a small rise in average hourly wages; and an unemployment rate of just 3.8%.
The recent stock price gains have valuations moving higher once again and we may see some softening over the next several weeks before we head into the final months of trading for the year. So far, the S&P 500 is up by 8.5% and the Nasdaq by a whopping 26% on the year, as the Dow lags with a 5% gain, thanks to weighing of big multi-national names subject to trade war fears. For now, the bulls are in the driver’s seat. However, this is an ever-changing situation, suggesting that investors proceed carefully and continue to maintain positions is high-quality dividend paying stocks trading at reasonable levels.
U.S. markets will be closed on Monday in observance of Labor Day. Enjoy the rest of the holiday weekend.
Here is the answer to last week’s trivia question: Accounting for 69 percent of U.S. freight rail mileage and 90 percent of employees, America’s Class I freight railroads operate in 44 states across the country and concentrate largely on long-haul intercity traffic. How many Class I railroads operate in North America? Five, Seven, Eight or Ten. Answer: Seven – BNSF (formerly Burlington Northern Santa Fe) a Berkshire Hathaway company, Canadian National, Canadian Pacific, CSX, Kansas City Southern, Norfolk Southern and Union Pacific – North America’s largest railroad.
Today’s Trivia Question: London-based energy giant BP plc is reintroducing what gas station brand in select U.S. markets? Amoco, Hess, Sinclair or Cities Service.