Markets "In a Nutshell" for February 20, 2018Feb 20, 2018
Investment Week at a Glance
Domestic stocks finished higher for the week. The Dow Jones Industrial Average was up 4.25%, the S&P 500 rose 4.30%, the New York Stock Exchange Composite (2,000 stocks) was up 3.78% and the average investors index (Value Line Index) was up 4.08%. Foreign stocks (DJ Global ex U.S.) were down 0.06%. Bond prices were lower for the week, pushing the yield on the 10-year U.S. Treasury up 2 basis point to finish the week at 2.87%. (Data sources: Barron’s Financial, Wall Street Journal)
Stocks Roar Back Despite Lackluster Economic News
The equity markets stabilized last week after two weeks of losses and significant volatility. Technology stocks outperformed as the markets regained their footing and as several tech companies reported better-than-expected earnings for the fourth quarter. In contrast, falling oil prices caused energy stocks to underperform.
U.S. economic data was largely disappointing last week. Initial jobless claims, retail sales, industrial production and the Empire manufacturing survey all were worse than expected. One exception: The University of Michigan’s consumer-sentiment index rose to its second-highest level in 14 years. In the fixed-income markets, international bonds outperformed—particularly emerging markets debt—as investors transitioned away from U.S. bonds in the wake of rising yields. In general, long-duration bonds underperformed for the week as rates rose.
Emerging Markets Outperformed on Weak U.S. Dollar
Internationally, economic data from emerging markets outperformed expectations—with industrial production in Russia and India coming in higher than anticipated. Additionally, money supply growth in China and retail sales in South Africa beat expectations. However, results out of Japan disappointed as core machine orders, GDP growth and producer price inflation all came in below expectations. Emerging markets stocks outperformed on continued weakness in the U.S. dollar and global investors’ increased appetite for risk assets. However, the Japanese market underperformed, as relentless strength in the yen created fears about Japan’s economic growth prospects.
Individual currencies trade in pairs. What is the U.S. Dollar/British pound pair commonly referred to? A. Cable b. Union Jack c. Empire d. Trans-Atlantic. Answer is below…
Have a good week!
Answer to quiz:
a. Outside of indexes, currencies always trade in pairs. If you sell one, you buy the other and vice versa. The name “cable” for the dollar-pound pair originated in the mid-19th century because the trades would be transmitted via trans-Atlantic cable.