Traders were in a festive mood this week after a shaky start. The Dow Industrials dialed up a gain of 3% after trade war tensions got dialed back. The broader S&P 500 Index and the Nasdaq Composite moved higher by better than 2.7%. The Dow transports surged 4%. The advance was broad-based with every Dow component in the green and all market sectors closing out the week in positive territory. Leading the pack were tariff sensitive basic material stocks and industrials, moving higher by about 3.3%. All other sectors were positive by over 1.75%. For the month of August, however, equities were in the red with the Dow and S&P off by around 1.8% and the tech-driven Nasdaq slumping 2.6%.
The economy is lying in wait, with most business and consumer indicators showing alternating strength and weakness, but with the dominant trend still relatively positive. Housing numbers have been mixed, but retail spending rose nicely in July, continuing an upward shift in buying as consumer confidence flattened out. The picture may not change all that much going forward, with upcoming reports also likely to evidence a somewhat uneven pattern, as the business expansion enters a second decade. As such, the recent expectation is for GDP growth, which totaled 2.0% in the second quarter, to hold in that range over the final four months of this year. Then there is the trade war with China -which changes direction almost daily – and is putting some pressure on growth.
Moreover, there now are fewer options to fight a potential economic slowdown, given that there is little room left to reduce interest rates and that fiscal options are limited in this politically charged backdrop. It is little wonder that volatility is on the rise as we head into September – an historically weak month for equities. The only certainty in these times is uncertainty, and that can be distressing for traders and long-term investors alike. However, with the fundamentals still generally sound, high-quality, dividend paying stocks remain an attractive option.
Stock and bond markets in the U.S. and Canada will be closed on Monday in observance of Labor Day. Enjoy the rest of the holiday weekend.
Here is the answer to last week’s trivia question: Days Inn, Ramada and LaQuinta are hotel brands of what company? InterContinental Hotels Group, Hilton Worldwide, Choice Hotels International or Wyndham Hotels & Resorts. Answer: Wyndham Hotels & Resorts.
Today’s Trivia Question: Iconic department store chain Macy’s – founded in 1929 – was formerly a brand of what department store holding company? Federated Department Stores, Inc., Associated Dry Goods, The May Department Stores Co. or Mercantile Stores Co., Inc.