Economic Market/Portfolio Happenings
Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
All data is for the week ended March 1, 2019:
Market indices around the globe were up – with the exception of emerging markets – led by the NASDAQ which was up 0.93%. The benchmark S&P rose 0.46%, the Dow Jones increased 0.07% while the Russell 200 rose just 0.02%. Emerging markets were down 0.65%. Within the S&P, energy and technology sectors led the gains while real estate and materials lagged the market.
Interest rates rose as values fell, with the benchmark 10-Year Treasures ending the week with a 2.76% yield, up 11 basis points. (1) Federal Reserve Chair Jerome Powell delivered the central bank’s semi-annual Monetary Policy report and provided testimony before the Congressional financial services committees this past week. His message remained that changes in fed interest rates will be data dependent, with no rate hikes unless and until economic growth and/or inflation accelerates significantly.
Oil prices declined last week on worries of lower demand although supplies have been reduced in recent weeks. West Texas crude closed at $55.80 per barrel, down 2.6%. (2)
Economic growth for the fourth quarter was reported at 3.1% on a year over year basis (or 2.6% annualized in the quarter), ahead of consensus estimates, boosted by strength in business investments (up 6.2%) and research & development (up 13.1%). For the full year our economy grew 2.9% up from the 2.2% growth achieved in 2017. (3)
On Friday the United States Trade Representative's office released language to delay a scheduled hike in tariffs on $200 billion worth of Chinese goods, saying that it is "no longer appropriate" to raise the rates due to progress in negotiations with the Chinese representatives in recent weeks. (4)
The University of Michigan consumer sentiment index was 93.8 at the end of February, down from the mid-month reading of 95.5. While still quite positive, the bounce-back from January’s end of the Federal shutdown faded in late February. The data indicates a further 2.6% growth in consumer spending this year, continuing the economic expansion we’ve enjoyed since early 2009. (5)
Reports on US home construction and prices signaled a lackluster end to 2018 for a housing market that has been held back by rising mortgage rates and an increase in labor and material costs. US residential housing starts fell 11.2% in December compared to the prior month. (6) However, January pending home sales were encouraging, rising 4.6% month over month vs. expectations of flat to slightly down. (7) The closely watched Case-Shiller index which tracks home values in 20 major markets climbed 4.2% year over year.
The average rate on a 30-year fixed-rate conforming mortgage was 4.66% for the week ending on February 15, according to the Mortgage Bankers Association. That is down from a recent high of 5.17% in November. (8) The rate drop has also lifted sentiment in the homebuilding sector.
Proprietary portfolio happenings:
Home Depot (HD), a Core Select holding, reported operating earnings and sales that were in line with expectations. The company increased its dividend by 32% for 2019. (9) Shares ended the week down 3.5% reflecting disappointing existing home sales in the most recent report (see Economic Data above).
Insulet Corp. (PODD), a G33 holding, reported revenues and earnings that beat estimates. (10) Given the momentum generated in the quarter and the fact that they have a new CEO and CFO, investors were encouraged and sent the shares 10.2% higher for the week.
PaloAlto Networks (PANW), a G33 holding, beat Street expectations for revenues and earnings as billings grew by 27%. (11) Shares rose 8.9% for the week.
Splunk Inc. (SPLK), a G33 holding, reported revenue and earnings that exceeded expectations, and the developer and marketer of software solutions increased their outlook for the coming year. (12)
Did You Know?
In the fictitious book and movie, Crazy Rich Asians, the enormously wealthy Young family inhabits a sprawling mansion & gardens set within Tyersall Park in central Singapore. Actually, the 34-year-old Crown Prince of Johor has inherited a vacant plot of private land 30 times the size of The White House with two abandoned mansions in this band of untended jungle. In a city where almost 12,000 people are crammed into each square mile, this Tyersall Park land is one of the greatest urban holdovers in Asia.
Sources: (1) JP Morgan Weekly Market Recap 3/4/19, (2) Oilprice.com3Bureau of Economic Advisors, (4) New York Times “U.S. Trade Representatives Issues Notice” 3/1/19, (5) University of Michigan Survey of Consumers 3/1/19 release, (6) U.S. Census Bureau 2/26/19, (7) CoreLogic Case-Shiller National Home Price Index 2/26/19, (8) National Association of Realtors 3/1/19, (9) Home Depot press release 2/26/19, (10) Insulet Corp. press release 2/25/19, (11) PaloAlto Networks press release 2/26/19, (12) Splunk Inc. press release 2/28/19