Stocks pushed slightly higher this past week with the broad-based S&P 500 moving ahead 0.4% and closing above the technically important 2,800 level. The Nasdaq Composite Index was up nearly 1%, as technology stocks bounced. But the Dow ended its nine-week winning streak with a 5-point loss, or 0.02% to close out the week at 26,026. Although oil prices moved lower by $1.46/bbl., energy stocks followed tech in the sector race along with some health care and industrial names. Basic material stocks, however, gave back nearly 1 ¾ percent and gold once again fell below the $1,300/oz. mark to settle at $1,296.40.
Analysts were crediting the Congressional testimony by Federal Reserve chair Jerome Powell for most of this week’s move reiterating that the central bank was close to reducing its balance sheet and no mention of any impending rate hikes. But the economy is starting to run into some headwinds as seen in GDP growth. After surging 4.2% and 3.4%, respectively, in the second and third quarters of 2018, growth slowed to 2.6% in the fourth quarter. Softness in orders for nondefense capital goods and slippage in existing home sales and housing starts are signs to consider as we evaluate the next few quarters. Taken together, such trends suggest that GDP growth will slow further – perhaps into the 1.5%-2.0% range – in the current three months. The apparent slowdown, however, is putting a lid on inflation and interest rates may be on hold through mid year or longer, especially if economies continue to deteriorate overseas.
Equity prices are close to where they were back in mid-November with the Dow Industrials rising 11.1% so far this year; its best two month gain since 2009. While the longer-term trend remains positive, such a quick and sharp reversal from last year’s December swoon may invite some swift and painful profit taking. With first quarter earning’s season in the rear-view mirror, there are few catalysts to move stocks higher and some market pundits are calling for a reduction in exposure to equities. For the seasoned investor, however, any dips may be a good opportunity for picking up some high-quality names for the long run at better prices.
Here is the answer to last week’s trivia question: What company manages the SPDR exchange traded funds? Standard & Poor’s, Invesco, State Street Global Advisors or BlackRock. Answer: Frank from NJ got it right – State Street Global Advisors
Today’s Trivia Question: Fertilizer giant Potash Corp. of Saskatchewan merged with Calgary-based rival Agrium in January of last year to form what new combined company? Agrium-Potash of Canada, Inc., Nutrien Ltd, PhosAgro Corp. or The Mosaic Co.