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 April 26, 2019:
The US stock markets were strong last week, with the S&P up 1.21%, the Russell 2000 up 1.67% and the NASDAQ up 1.86% as US GDP for the 1st quarter surprised to the upside indicating that US economic growth is not stalling. In the US the healthcare and communication services sectors made the greatest gains while the energy sector pulled back as oil pulled back from recent highs. Overseas, the emerging markets and the developed markets were weaker, down 1.30% and 0.15%, respectively. Investors are still concerned about a Euro zone slowdown after Germany’s Ifo business climate survey fell for the seventh time in the last eight months. (1)
Interest rates fell last week as bond prices declined modestly, with the benchmark 10-year treasuries closing at a 2.51% yield, down 6 basis points for the week but well of their 2.39% closing lows just three weeks ago. The 2-year treasury was also down for the week. Its interest rate stood at 2.28%, down 10 basis points for the week. The spread between a 2 and 10 year US Treasury is now 13 basis points, close to inversion, but not quite there yet. (2)
Global oil markets had an uneven week when the US announced it would not be renewing sanction waivers to eight countries that purchase oil from Iran. Prices hit six-month highs midweek, but WTI finished down 1.09% and Brent was only up on 0.25% for the week. The IEA forecasted ample global oil supply despite the Iranian sanctions and several producers reported continuing production struggles in the US Permian Shale. (4)
US economic growth (GDP) was reported at a 3.2% annualized rate for the first quarter, well ahead of consensus expectations in the 2.5% area. Net exports were a key driver of the outperformance. Core inflation (excluding food & energy) rose just 1.7%, below the 2.0% recent trend. As a result, the US dollar gained strength against the euro. With lower core PCE, the Federal Reserve’s preferred inflation measure, at 1.3% for the month, and ongoing strength in the labor market, investors saw the economic release as a positive signal of stabilizing US growth.Orders for long-lasting durable goods posted the biggest increase in March since last summer, potentially signaling a rebound in the industrial side of the economy. Durable-goods orders leaped 2.7% last month, led by stronger demand for autos, planes and networking equipment. This represented a sharp turnaround from last month’s reported 1.1% drop and a major beat vs. the consensus estimate of a 0.5% increase. Autos showed strong gains in orders, up 2.1%.If cars and planes are stripped out, orders rose a smaller but still solid 0.4%. (3)
Proprietary portfolio happenings:
Amazon (AMZN), a G33 and Core Select holding, reported revenues and earnings that exceeded expectations. Management pointed to higher investment in 2019, increasing expenses to continue to grow revenues which will begin to drag down the earnings growth rate (as it shifts to 1-day delivery in the US starting this month) in their quest to increase sales growth.6 Shares rose over 4% for the week. (5)
Intel Corp. (INTC), a Core Select holding had a tough week after reporting earnings on Thursday after the market closed. The stock was down over 10% for the week. The quarter was fine, but they lowered 2019 revenue and earnings guidance substantially. The company is concerned about slower data centric product growth. (6)
Visa (V), a G33 and Core Select holding, management reported a good 1st quarter earnings report and raised full year guidance on core growth in the first half of their fiscal year and encouraging recent trends.
Did You Know...The first vending machine was invented by Hero of Alexandria around 215 BC. When a coin was dropped into a slot, its weight would pull a cork out of a spigot and the machine would dispense a trickle of water.
Sources: (1) JP Morgan Weekly Market Recap 4/29/19, (2) Goldman Sachs Market Monitor week ending 4/26/19, (3) Bureau of Economic Advisors 4/26/19, (4) https://www.iea.org/newsroom/news/2019/april/iea-statement-on-global-oil-markets.html, (5) Amazon press release 4/25/19, (6) Intel press release 4/25/19