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Market recap week ending 5.17.19

Darren Leavitt, CFA

Investors were taken for a wild ride last week as trade negotiations between the US and China came to a stalemate.  Additionally, increased tensions in the Middle East put a bid into oil, which closed up 1.7% but also inhibited investors risk appetite.  For the week, the major averages succumbed to losses but intraday price swings throughout the week kept traders on their toes.  The S&P 500 lost -0.76%, the Dow gave up -0.69%, the NASDAQ shed -1.27%, and the Russell 2000 led declines with a loss of -2.37%.  Treasuries mimicked their equity counterparts with volatile trade.  For the week, the 2-year fell three basis points to yield 2.21% while the 10-year fell seven basis points to yield 2.39%.  Gold lost ~$12 for the week and closed at 1287 an oz.  There were no changes to our models last week.

On Monday, China announced that it would impose a higher level of tariffs on 60 billion worth of US goods.  The news sent the market sharply lower with the S&P 500 trading below its 50 day moving average. Subsequently, positive tones on trade with Europe, Canada, and Mexico helped market sentiment and encouraged the buy the dip mentality.  Tensions were increased again mid-week when President Trump signed an executive order to protect US technology interests- an action seen directed right at the Chinese and specifically toward Chinese telecom equipment company Huawei.  The news hit the semiconductor sector and dampened market sentiment again.  The markets shrugged off the tensions again on Thursday, and at one point the S&P 500 was actually up for the week- then on Friday it was reported that talks between the US and China had stalled, the news sent the market lower.

Economic data provided a mixed bag of results last week.  Housing Starts were better than expected, coming in at 1235k versus the consensus estimate of 1200k.  Jobless Claims still indicate a strong labor market with claims coming in at 212K versus the consensus estimate of 222k.  Consumer Sentiment data was also better than expected, coming in at 102.4 versus the consensus estimate of 96.9.  On the other hand, retail sales were much weaker than expected, coming in at -0.2% versus the estimate of 0.4%.  Industrial production also missed the mark, coming in at -0.5% versus the consensus estimate of 0.1%.

Finally, increased tension between the US and Iran were also on investor’s minds last week.  Saudi oil tankers and pipelines have reportedly been sabotaged; an action believed to be tied back to Iranian assets within Yemen.  The US continues to increase its presence in the region, which indicates this geopolitical variable will be with the markets for the foreseeable future.

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