For the holiday-shortened week, equities hit new intra-week highs as expectations for an interest rate cut by the Federal Reserve this month and easing of trade tensions with China helped stocks move up. In all, the Dow industrials rose 1.2% to 26,922.12; the S&P 500 moved higher by 1.6% to 2,990.41; and the Nasdaq Composite climbed 1.9% to 8,161.79. All three narrowly missed finishing the week at record highs as stocks sold off on Friday. Crude oil settled back a bit to $57.51/bbl., sending energy stocks lower by one percent – the only market sector in the red. Technology stocks took top prize with a group gain of 2.5%, followed by telecom and consumer stocks. Gold prices also retreated by $13.00/oz. to $1,396.70.
In June, the economy added 224,000 jobs, well above expectations of 165,000, according to the Labor Department. The unemployment rate ticked up to 3.7%, however, as more people entered the workforce, but still near a 50-year low. Wage growth was 3.1% year-over-year, one-tenth of a point below estimates. Although the decade-long business expansion should continue in the second half and into 2020, the 3.1% rate of growth posted in the first quarter likely will be this upturn’s high point for the year, with selective weakening expected over the next four to six quarters according to Value Line. Areas of the economy linked to trade, manufacturing and housing are no longer faring as well and face considerable uncertainty moving forward. Then, there is consumer spending, which struggled in the first quarter, despite the 3.1% rise in GDP.
Through it all, the bulls remain in charge with equities showing developing strength as the calendar turns to the second half of the year and hopes for a continuing summer rally gain traction. With a dovish Federal Reserve, prospects for some trade tension relief and upcoming second quarter earnings looking favorable should keep investors in a buying mood. Ongoing geopolitical and slowing growth challenges facing investors aside, the outlook for stocks remains compelling.
Today’s Trivia Question: Which was the top stock in the S&P 500 so far this year? Visa, Facebook, Xerox or Johnson Controls.