WEEKLY MARKET SUMMARY
Global Equities: US stocks kept their positive momentum, reaching further new highs thanks to strong corporate earnings and optimism over trade deals. The S&P 500 gained 1.5% to hit a new all-time high, as did the Nasdaq Composite, which advanced 1.0%. The Dow Jones Industrial Average was also positive with a 1.3% weekly return. US Small Caps were also in the green for the week with a 1.0% gain. Progress on US-Japan trade talks propelled Foreign Developed stocks to a 2.7% weekly gain, while Emerging Market stocks were up 0.9%.
Fixed Income: 10-Year US Treasury yields eased to under 4.4% on economic data that indicated the economy remains on solid footing. The probability of a July Fed rate cut is near zero, while investors are giving a September cut roughly 60% odds. High yield bonds finished 0.3% higher during the week.
Commodities: Crude prices slipped, with US West Texas Intermediate ending the week at $65.18. US drillers reduced the amount of operational oil and gas rigs for the 12th time in the last 13 weeks. Gold prices were down for a second consecutive week, ending around $3,340/oz.
WEEKLY ECONOMIC SUMMARY
Durable Goods Orders Slipped: The headline number of a -9.3% decline in Durable Goods Orders may seem alarming, but the data was skewed by last month’s 16.4% increase that was attributable to purchases of Boeing aircrafts so a large decline was anticipated. Ex-Transportation Durable Goods were up 0.2%, slightly better than expected. Core Capital Goods, which exclude Defense and Aircraft, declined -0.7% during the month.
President Trump Visits the Fed: President Trump appeared to be making a case for firing Fed Chair Jerome Powell in recent weeks, criticizing the renovation of the Fed headquarters that has gone $600 million over budget. Trump paid a visit to Powell on Thursday to personally inspect the construction, and perhaps to plead his case for a rate cut. Despite an awkward moment of confusion over the cost of the renovation, the temperature appears to have cooled for now, with Trump stating he is not actively seeking to fire Powell.
First Q2 Mag 7 Earnings: Alphabet (GOOG) and Tesla (TSLA) were the first of the “Magnificent Seven” names to report second quarter earnings, with mixed results. Alphabet reported strong earnings growth across its Search, Cloud, and YouTube business segments, sending shares higher. The Google parent company also increased its capital expenditure by $10 billion, to $85 billion. Tesla earnings weren’t as bad as feared but still showed the EV-maker is losing market share to competitors. CEO Elon Musk said Tesla is facing “rough quarters” ahead, largely due to the loss of clean energy regulatory credits that account for roughly half of Tesla’s operating income.
CHART OF THE WEEK
The Chart of the Week shows the respective weights of the 11 S&P 500 sectors, along with Nvidia (NVDA), which has grown to a market capitalization of $4.2 trillion. Nvidia now exceeds the market capitalization of five sectors, and along with other big tech companies such as Apple (AAPL) and Microsoft (MSFT), has been responsible for a large portion of market returns over the last several years. Investors will have to wait until August 27th for Nvidia earnings, but Microsoft will report July 30th and Apple earnings will be released July 31st.
