Volatility returned big time to Wall Street this week with unsettling intra-day swings in all three of the major averages. When the dust settled, the Dow – which ended a three-week losing streak – moved ahead by half of one percent to 25,444. The S&P 500 was flat and the Nasdaq composite managed to net out at a gain of 0.6%. The technical picture, however, remained negative with 558 new 52-week lows recorded on the NYSE vs. 50 new highs and volume was relatively light on those days where the market tried to rally. Sector performance was also a mixed picture with about half in the green and the remaining losing ground. A decline in crude oil sent the energy sector to a nearly 2% loss, followed by respective losses of 1.4% and 1.2% in technology and basic material stocks. Safe-haven utilities and telecoms – despite rising interest yield competition – were the leaders with green arrows of 3% and 2%, respectively. Gold continued its slow recovery up $7.20/oz. to settle at $1,225.30.
Italy’s standoff with the European Union over its budget and signs of China’s economy slowing along with its slumping stock market were the primary culprits this week. In addition, rising interest rate worries here at home and indications that Republicans will probably lose control of the House, offset some good earnings reports. My sense is that the recent drop in stocks has been overdone. First, business expansion appears sufficiently well grounded to handle a modest rise in interest rates and latest consumer pricing data suggest inflation will not push sharply higher anytime soon.
The ongoing headwinds from tariffs, monetary policy moves, and foreign budget wrangling may stick around for a while and equities will likely continue to muddle through headline news with ongoing volatility. However, the economic backdrop remains strong as does consumer and business sentiment. As for earnings, it will be a busy week for blog followers as we hear from 3M, Verizon, United Parcel Service, Gilead Sciences and Intel. Stay tuned.
Here is the answer to last week’s trivia question: What is the largest U.S. lumber company based on production of board feet of lumber? Georgia-Pacific, Weyerhaeuser, Rayonier or Louisiana-Pacific. Answer: Weyerhaeuser.
Today’s Trivia Question: Diversified financial management and mutual fund firm Invesco announced plans this week to purchase Oppenheimer Funds for $5.7 billion. Oppenheimer is owned by? The Bank of New York Mellon, State Street Corp., Blackrock or Massachusetts Mutual Life Insurance.