Investors reversed course this week breaking a month-long downturn for stocks. An apparently oversold market brought in buyers with the Dow Industrials adding 1,169 points or 4.7% to close out the week at 25,983.94. Likewise, the S&P 500 responded with a 4.4% gain and the Nasdaq moved ahead by 3.9%. It was the best week for all three indexes since November 2018. Brightening the equities picture was market breadth with all major sectors in the green. Basic material stocks were the clear winners with a nearly 8.6% pop followed by a recovering telecom group and consumer goods, respectively posting 5.7% and 5.6% average gains. Technically speaking, there were 2,440 stocks that gained ground on the NYSE vs. just 745 last week. Crude oil prices stabilized to settle a bit under $54/bbl. and gold prices moved up $35.40 to close the week at $1,341.20.
A May jobs number came in well below estimates at 75,000 new positions, convincing traders that the Federal Reserve may indeed cut interest rates later this year as the economy cools down and trade worries escalate. GDP growth, up 3.1% in the first quarter, may gain just 2% or so in the current period. A similarly underwhelming performance is likely in the second half. While trade negotiations with China are moving along in the right direction, albeit slowly, the situation with Mexico is heating up and 5% tariffs on all imports from our southern neighbor are to go into effect on Monday. So . . .
. . . for now, I expect the market’s back and-forth action to continue as trade and interest rate headline news take center stage. With the absence of any positive or negative catalysts, equities will most likely remain range-bound. But such a consolidation phase may prove constructive, as a holding pattern would help the stock market digest its strong early 2019 gains. In such a setting, the best course is to select and hold onto quality, dividend-paying names for the long haul.
Here is the answer to last week’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. Answer: Chicago’s Mondelez, maker of Oreo cookies, Cadbury chocolates and Ritz Crackers.
Today’s Trivia Question: Cellular technology pioneer Qualcomm sold its mobile phone handset business in 2000 to what company? Kyocera, Ericsson, Nokia or Samsung.