Markets "In a Nutshell" for October 3, 2018Oct 03, 2018
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average was down 1.07%, the S&P 500 fell 0.54%, the New York Stock Exchange Composite (2,000 stocks) was down 1.16% and the average investors index (Value Line Index) was down 1.16%. Foreign stocks (DJ Global ex U.S.) were down 0.91%. Bond prices were flat for the week, finishing the week at 3.06%. (Data sources: Barron’s Financial, Wall Street Journal)
Stocks Mostly Lower As New Sector Is Introduced
Most major market indices fell last week with the exception of the technology heavy Nasdaq Composite Index, which rose 0.74%. In addition to technology stocks, consumer discretionary stocks outpaced all other sectors within the S&P 500. Basic materials along with financial stocks fell lower for the week.
Last Friday a new communication services sector was created within the S&P 500. This new sector will replace the small telecom services sector and incorporate numerous internet based companies originally considered either information technology or consumer discretionary (Facebook, Netflix, etc.).
Interest Rate Hike
It comes as no surprise that last week’s meeting of the FOMC (Federal Open Market Committee), which is the committee that sets monetary policy, resulted in the federal funds rate being hiked 0.25% to a target range of 2.00%-2.25%. This is the 3rd interest rate increase this year and the 8th since 2015.
New Federal Reserve Chairman Jerome Powell stressed that the United States economy is strong and hasn’t been negatively affected by the Trump Administrations new tariffs. The Federal Reserve all but confirmed what most have observed; domestic growth is continuing to strengthen. As the economy strengthens, policy needs to be tightened to keep a balance between higher inflation and the potential of slowing or negative growth. The Federal Reserve’s duel mandate is centennially completely fulfilled with the rate of inflation near 2% and unemployment below 4%.
Domestic equities enjoyed a solid second quarter performance of +7.7%. This is the best seconf quarter since_____?
Have a good week!
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