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Week Ending 5/13/2017

Summary

  • International Emerging Markets claimed the winners spot this week
  • Oil prices covered but remain meaningfully lower year-to-date
  • U.S. stocks were lower with small-cap stocks shedding the most value
  • Economic reports showed encouraging signs for a strengthening economy

Notable Market Headlines

U.S. stocks closed the week lower with U.S. large stocks down just -0.30% while U.S. small stocks fell -1.1%. Of course, the majority of sectors were lower as the broad market indexes show with the biggest declines in Basic Materials, including stocks such as steel giant Nucor Corp (NUE) and packaging company Sealed Air (SEE), and Financials losing -1.27%. Technology stocks continue to perform well this year including a gain this week of +1.18%.

International developed country stocks were down with U.S. stocks by -0.53% but remain one of the better performers year-to-date with a gain of +13.0%. International emerging markets bucked the trend of other equity markets, once again demonstrating the value of a diversified portfolio, with an impressive gain of +2.56% for the week and now up +17.74% year-to-date. This week some of the largest emerging markets were higher including China up +3.4%, Brazil gaining +5.7%, and South Korea +5.90%.

The two indexes lower year-to-date are Commodities and Real Estate. They went opposite directions this week as Commodities gained +2.00% and Real Estate lost -1.35%. Year-to-date commodities have simply been suffering from a decline in the price of oil after a strong year in 2016. Real estate is lower as investors fear higher interest rates in the future which would put downward pressure on prices.

Gold and Bonds were little changed for the week with gold down -0.15% and bonds higher by +0.14%. An economic report indicating inflation remains relatively low impacted both of these indices.

Winners and Losers by Sector

Stock Highlights

NVIDIA Corp. (NVDA) jumped +23.1% or +$14.3 billion! NVIDIA manufactures computer graphics products and also focus on artificial intelligence. The company reported better than expected earnings and sales. Wall Street had been questioning the company’s ability to maintain such momentum and was proven wrong by this report.

Electronic Arts (EA), one of the nation’s leading developers of games for all types of devices, reported strong earnings. This successful quarter was driven by its games Battlefield, FIFA, and Star Wars franchises. The stock gained +13.9% this week and is among one of the best performing stocks year-to-date with a gain of +38.5%.

Apple Inc. (AAPL) continued its incredible move higher, gaining another +4.8%, and is now valued at nearly $814 billion!

Retail stocks, in spite of a report showing Retails Sales were higher in April, suffered some major losses this week, adding to their pain since the start of the year. Below are notable losers for the week:

  • Macy’s Inc. (M): -18.5%
  • Nordstrom Inc. (JWN): -15.9%
  • Kohl’s Corp. (KSS): -9.0%
  • Ralph Lauren Corp. (RL): -6.9%
  • Gap Inc. (GPS): -4.8%

The story for these retailers is simple and ongoing…consumers are simply buying more online resulting in fewer consumers visiting the mall and declining revenue. As a comparison, online retailer Amazon (AMZN) was higher by +2.9%.

Sealed Air (SEE), the maker of bubble pack and other packaging products, saw its stock drop by -7.1% this week. Wall Street was disappointed with the company’s earnings report showing sales growth of +2.6%. The company is going through a transitional year according the its CEO’s comments which includes an earlier announced sales of a major division of the business. In spite of the stocks difficult week, it has had a great run the past 5 years as compared to the S&P 500 as illustrated in the below graph.

Economic Indicator - Reported

April retail sales rebounded from a weak first quarter but were not a strong as economists had hoped. April came in at +0.4%, two-tenths below estimates, helped by an increase in auto sales after having fallen sharply in recent months. In addition to a positive April report, March’s number was revised from a decline of -0.1% to a revised positive 0.2%...a subtle reminder to no overreact to initially reported numbers.

We received to reads on inflation, one for producer prices and one for consumer prices. The Producer Price Index rose more than twice as fast as had been expected at +0.5% while consumer prices rose just +0.2%. There is concern that this puts pressure on company profits as their cost of inputs, producer prices, are rising faster than the prices they are getting for finished goods, consumer prices.

Economic Indicators – Upcoming

Industrial Production, a measure of manufacturing output in the United States and a huge component of the overall economy, will be reported. Economists expect growth of +0.4%.

Housing starts are near pre-crisis highs and expected to increase to an annualized rate of 1.256 million for April.

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