Market Recap for the week ending 1/18/19
-Darren Leavitt, CFA
Despite somewhat disappointing corporate earnings results and a failed Brexit vote, markets continued to rally last week. The S&P 500 gained 2.9% for the week while the Dow, NASDAQ, and Russell 2000 increased 3%, 2.7%, and 2.4%, respectively. The markets were able to shrug off some disappointing news and instead focused on reports that the Trump administration’s trade negotiations had yielded some positive results. Specifically, reports indicated that the administration would drop current tariffs on Chinese goods in return for China to effectively import enough goods over the next few years to eliminate the US/China trade deficit.
The week also produced some decent economic data which seemed to relieve some economic growth fears that had weighed on investors sentiment in the last part of 18. Technically the market was also able to go through and hold its 50-day moving average and in turn induced some short covering which helped to propel the market even higher. The positive tenor was most evident in the more cyclical sectors, with the materials, industrials, tech, and financials all having a strong showing last week. Notably, the financials, despite a mixed bag in earnings results, were able to continue their rally and have now gained nearly 9% in the month of January. On the other hand, Treasuries continued to struggle. The 2-year note yield increased 6 basis points to close at 2.61%, while the 10-year bond yield tacked on 8 basis points to close at 2.78%. Oil continued to be bid with WTI closing just shy of $54 a barrel. API figures showed a decent draw in oil inventories and the Baker Hughes Rig count figure was also off significantly, which seemed to temper supply concerns. There were no changes to our models last week. Please let us know if you have any questions.
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