With the government announcing that Q2 GDP was higher than forecast plus Alphabet and Starbucks turning in great earnings reports, the Dow jumped up 51 points and the S&P and Nasdaq reached new record highs. The GDP report was exactly what the market wanted. As today’s expert stated, “not so soft that the economy is slowing down precipitously and not so strong that the Fed is going to reverse course,” thereby solidying expectations that there will be a rate cut. This is a reversal of yesterday’s sentiment when the ECB decided the economy was strong enough to put off a rate cut. Today 75% of 218 S&P companies have beaten estimates and the better news is that next week we’re heading into more trade negotiations in Shanghai which will be watched closely. Volume was a little below average at 6.1 billion.
I am moving this weekend and will thus be disconnected from the Internet while Comcast transfers the service. This will be the last post for a little while until I get settled into my new place in Bloomfield Township. So, below the Reuters report, you will find the weekly summation on Friday night instead of Sunday night. I will try to be back online as soon as I can, but there is still much to do with the transition. I found out in early June that I’d have to move and it’s been a dizzying and exhausting whirlwind since and, though I’ll hopefully be moved into my new condo Sunday night, there is still a good deal of clean up work in the next weeks to get my house completely vacated. And I’m already exhausted.
fri JULY 26, 2019 / 6:03 pm
Alphabet, Starbucks drive Wall Street
to record high
DJ: 27,192.45 +51.47 NAS: 8,330.21 +91.67 S&P: 3,025.86
+22.19 7/26
(Reuters) - Robust earnings
from Alphabet and Starbucks pushed the S&P 500 and Nasdaq indexes to record
highs on Friday, with support from data showing U.S. economic growth slowed
less than expected in the second quarter.
The U.S. Commerce Department said GDP increased at an annualized rate of
2.1% in the second quarter, higher than a 1.8% rate forecast by economists
polled by Reuters.
The GDP data further
solidified wide expectations that the U.S. Federal Reserve will cut interest
rates at its policy meeting next week. Those expectations have powered a
solid run in stocks this month, helping Wall Street scale record levels. “This is just what the market needed, not so soft that the economy
is slowing down precipitously and not so strong that the Fed is going to
reverse course,” said Art Hogan, chief market strategist at National
Securities in New York. “It shows that the economy is slowing, but not nearly
enough to raise any red flags.” The data
comes on the heels of European Central Bank President Mario Draghi’s speech on Monday,
which was less dovish than investors had anticipated and led the S&P 500 to
post its first loss in the week.
Two weeks into the second-quarter earnings season, about 75% of the 218 S&P 500
companies that have reported so far have topped profit estimates, according to
Refinitiv data.
Starbucks (SBUX.O) rallied 8.9% to a record high after
the world’s largest coffee chain posted its biggest same-store sales growth in
three years. Alphabet Inc (GOOGL.O) surged 9.6% after beating Wall Street
targets on higher ad sales and growth at its cloud unit, a high-margin business
it is leaning more on to drive expansion.
Twitter Inc (TWTR.N) rose 8.9% after it posted
better-than-expected quarterly revenue and an uptick in daily users who see
advertisements on the site. Their upbeat
earnings pushed the S&P 500 communication services index .SPLRCL up 3.25%,
the most among S&P sectors.
Lead negotiators
for China and the United States are set to meet in Shanghai on Tuesday for two days in the
next round of talks aimed at settling the U.S.-China trade war. The results of
those talks will affect
sentiment on Wall Street. “Going
forward, it’s very important
not to have a breakdown in trade talks. And earnings reports need to
continue to come in as they have been - a little better than expectations,”
said Tom Martin, a senior portfolio manager at GlobAlt Investments in Atlanta.
The
Dow Jones Industrial Average .DJI rose 0.19% to end the week at 27,192.45
points, while the S&P 500 .SPX gained 0.74% to 3,025.86. The Nasdaq
Composite .IXIC added 1.11% to 8,330.21. For
the week, the S&P 500 added 1.7%, the Nasdaq climbed 2.3% and the Dow rose
0.1%. Even under the cloud of
uncertainty related to trade conflict, the S&P 500 has risen 21% so far in 2019.
Also on Friday, McDonald’s Corp (MCD.N) jumped as much as 2.1%, briefly hitting a record high
after beating quarterly sales expectations at established U.S. restaurants. Amazon.com Inc (AMZN.O) fell 1.6% and was the biggest drag on the
benchmark S&P 500 after the online retailer reported its first profit miss
in two years and said income would slump in the current quarter. Intel Corp (INTC.O) lost 1.1%, even after the chipmaker gave an upbeat
current-quarter forecast and raised its full-year revenue guidance.
Advancing issues outnumbered declining ones on the NYSE by a
2.04-to-1 ratio; on Nasdaq, a 2.34-to-1 ratio favored advancers. The S&P 500 posted 41 new 52-week highs
and two new lows; the Nasdaq Composite recorded 111 new highs and 79 new lows.
Volume on U.S. exchanges
was 5.9 billion shares,
compared with the 6.3 billion-share average for the full session over the last
20 trading days.
Succinct Summation of the Week’s Events for 7.26.19
Succinct Summations for the week ending July 26th, 2019
Positives:
1. GDP rose 2.1% in Q2 exceeding the expected increase of 1.9%.
2. Jobless claims fell 10k w/o/w from 216k to 206k.
3. New home sales rose 42k m/o/m from 604k to 646k.
4. Wholesale inventories rose 0.2% m/o/m, meeting expectations.
5. New orders for durable goods rose 2.0% m/o/m, above the expected increase of 0.5%.
6. Same store sales rose 4.9% w/o/w, higher than the previous increase of 4.7%.
Negatives:
1. Home mortgage apps fell 2.0% w/o/w after previously falling 4.0% in the week prior.
2. International trade in goods deficit widened to $-74.2B, greater than expected $-72.5B
3. FHFA House Price Index rose 0.1% m/o/m, below the expected 0.3%.
4. Existing home sales came in at a 5.270M annual rate for June, below expected 5.320M.
5. Retail inventories fell 0.1% m/o/m after an expected increase of 0.5%.
6. PMI Composite FLASH came in at 50.0 for July, below the expected 51.0.
7. Chicago Fed National Activity Index came in at -0.2 in July moving 3-month avg to -.26.
8. Richmond Fed Manufacturing Index fell 14 points m/o/m from 2 to -12.
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