Stocks Up, Signals Mixed – Weekly Update

May 29, 2018 | By Steven DiGregorio

Geopolitical uncertainty affected stocks last week, as the historic summit between the U.S. and North Korea began to look less likely. On Thursday, May 24, President Trump announced that the summit was off, and stocks stumbled in reaction. The next day, Trump said the meeting might still occur next month, leaving investors questioning the eventual outcome.

Also on the geopolitical front, an announcement that Saudi Arabia and Russia would consider easing back oil supply restrictions affected stocks. U.S. crude oil prices dropped in response, pulling energy stocks down with them.

Despite these developments, major domestic indexes increased last week. The S&P 500 gained 0.31%, the Dow added 0.15%, and the NASDAQ grew by 1.08%. International stocks dropped, with the MSCI EAFE decreasing by 1.60%.

What kept U.S. stocks in positive territory for the week?

Solid corporate earnings helped drive upward movement.

A number of companies experienced double-digit stock growth last week after releasing their latest data. This strong performance helped balance the declines and uncertainty that the week’s geopolitical headlines created.

What other economic perspectives did we receive?

From durable goods to home sales, various data came out last week:

• The factory sector could drive economic growth, as steel and aluminum tariffs are contributing to rising value of orders and inventories for metals.
• Business confidence and 2nd-quarter investment could increase, as strong core durable goods orders may indicate good news for companies.
• Housing is underperforming, as growth in home sales volume and prices have softened recently.

Overall, last week provided a mix of insight about the current economic strength and geopolitical environment. In this week’s 4 trading days, we’ll gain more perspectives on consumer confidence, Gross Domestic Product, manufacturing, and employment. We will use this data to continue building our understanding of what may lie ahead in the markets—and how to prepare our clients for the future. If you have any questions, we are here to talk.

ECONOMIC CALENDAR
Monday: U.S. Markets Closed for Memorial Day
Tuesday: Consumer Confidence
Wednesday:GDP, ADP Employment Report
Thursday: Jobless Claims
Friday: Employment Situation, PMI Manufacturing Index, ISM Mfg Index, Construction Spending

 

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

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Tags: Aluminum, Consumer, DJIA, Dow, Earnings, economy, employment, GDP, Housing, NASDAQ, Oil, S&P 500, Steel, Tariffs

STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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