Market Recap for the week ending 7/26/2019

-Darren Leavitt, CFA

It was an upbeat market last week as investors continued to applaud the majority of earnings results.  A better than expected print on 2nd quarter GDP also aided the positive sentiment.  Markets were also encouraged with renewed hopes on trade negotiations between the US and China that were set to reopen over the weekend.  The S&P bounced back from last week’s loss gaining 1.65%; the Dow lagged the other averages increasing just 0.14% due to a lackluster week for component Boeing.  The NASDAQ led gainers with an increase of 2.26%, and the Russell inked a 2.01% gain.  Treasuries were somewhat muted last week; the yield curve flattened a bit with the 2-year note yield increasing by 3 basis points to close at 1.87%.  The 10-year bond was flat on the week and closed with a yield of 2.08%.  WTI crude gained 1% and closed at $56.17 a barrel.  Gold lost roughly $7 to close at 1419 an oz.   There were no changes to our models last week.

Earnings continued to roll in generally better than expected.  Google posted a stellar number last week which sent its stock price soaring and also helped to propel the communications services sector to a nearly 5% gain on the week.  Texas Instruments also had an excellent quarter and aided an already hot Semiconductor sector.  Facebook’s results produced a muted response.  We have heard results from roughly 40% of the S&P 500, so there is still quite a bit of information due from companies and will likely continue to be in focus for investors.

A better than expected print in advanced 2nd quarter GDP growth was a positive catalyst for the markets last week.  GDP for the 2ndquarter came in at 2.1% versus an estimate of 1.8%.  The reading is down from the Q1 growth rate of 3.1%, but the 2nd quarter results confirmed that the consumer is still well and out spending.  These results will likely not influence the Federal Reserve’s rate decision due on July 31st but may play into subsequent policy decisions.

Renewed negotiations between the US and China is a paramount variable for the markets to consider, but it seems most believe that very little will come of this weekend’s talks.  None the less, investors will be looking for catalysts coming out of the meetings.  The markets will also be waiting to hear from the Fed in the coming week with most expecting a 25 basis point cut on the 31st.

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