Another down week for stocks as trade tensions spilled over into Mexico and a deal with China now appears to be farther off than what was originally priced into equities. For the week, all market sectors were in the red led by the telecoms, which surrendered nearly 7%. Oil prices fell to a multi-month low with West Texas crude settling at $53.50/bbl. and sending energy names lower by 4.5% on average. The “best” performing group was the industrial stocks loosing 2%. In the holiday-shortened week, the Dow was off 771 points or 3% to close at 24,815 – its sixth straight weekly loss. The S&P 500 gave back 2.6% and the Nasdaq Composite 3.1%. Not surprisingly, gold moved higher by $22.80/oz/ to close out the week at $1,305.80.
To add to investor worries, the ten-year Treasuries hung below three-month bills, producing an inverted yield curve and raising recession fears once again. Global markets joined the correction, as growth around the world appears to be slowing further than expected. Here at home, we have seen flattening sales of existing homes and a drop in transactions involving new residences. There also has been a downturn in orders for durable goods, but further gains in consumer confidence has been a welcome plus. With 76% of the companies in the S&P 500 posting positive earnings surprises in the first quarter continued a multiyear uptrend and, in fact, was also above the five-year average of 72%. Nonetheless, a repeat in the upcoming quarters will be hard to come by given the slowing in business growth and factoring in tariff-related pressures.
Whether or not we have seen market lows is anyone’s guess, but a short-term catalyst does not appear in the offing. On balance, the investment picture remains reasonably reassuring, even with the late-May selloff and despite the growing economic headwinds that might stymie an aging bull market. It should be an interesting, if not volatile, week ahead.
Here is the answer to last week’s trivia question: Japan’s Sony Corporation’s entertainment business includes music, television and which major motion picture studio? Twentieth Century Fox, Paramount, Columbia or Universal. Answer: Columbia Pictures Studios.
Today’s Trivia Question: Kathleen King founded Tate’s Bake Shop in Southampton, New York in 1980. The boutique cookie company was sold last year for $500 million to which food giant? Kraft-Heinz, Mondelez, Unilever or General Mills.