While most of the headline news this past week was negative, stocks treaded water for the most part, but ended up slightly higher. There were geopolitical issues with a U.S. blamed Iranian attack on two oil tankers; China is digging in its heals on trade and semiconductor bellwether – Broadcom – lowered its outlook on slowing growth. For the week the Dow inched up by 0.4%, with similar moves in the S&P 500 and the Nasdaq gaining 0.5% and 0.7%, respectively. Small and mid-cap stocks were also higher within a 0.5% range. While Brent crude prices gyrated on the tanker attack news, oil settled lower here at home with West Texas Intermediate closing the week at $52.50/bbl., off $1.48. Most of the market sectors were positive lead by consumer services, basic materials and utilities. Energy stocks were the drag on the market, giving back about 0.8% on average.
The tariffs on Mexican imports were lifted on Monday providing some early relief in the week, but equities began to ebb as the President refocused his attention on China. The US annual inflation rate fell to 1.8% in May from a five-month high in the previous month and just below forecasts of 1.9%, raising expectations that the Federal Reserve will start cutting interest rates this year. The Fed’s FOMC will announce its monetary-policy decision on Wednesday, with a slight chance the central bank will move the federal-funds rate lower at this time. On the trade front, President Trump and China’s Xi are supposed to meet at the upcoming G-20 summit later this month, and the outcome will certainly move markets.
The business expansion is likely to persevere, but not without some twists and turns. The economic growth we have seen is now the longest on record and will probably continue into 2020. Such resilience, the promise of lower interest rates and the expectation of further earnings growth should keep this historic bull market intact. We will have two earning’s reports this week from electronics supplier Jabil, Inc. and Oracle Corp. Jabil is expected to have third quarter earnings of $0.57 per share compared to $0.46 a year ago and software giant ORCL is targeted to report fourth quarter profits of $1.07 per share vs. $.99 last year.
Here is the answer to last week’s trivia question: Cellular technology pioneer Qualcomm sold its mobile phone handset business in 2000 to what company? Kyocera, Ericsson, Nokia or Samsung. Answer: Japan’s Kyocera.
Today’s Trivia Question: “Never Boring. Always Surprising” is the tagline for what retailer? Kohl’s, Ross Stores, Marshalls or Foot Locker.