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    Markets "In a Nutshell" for October 23, 2018

    Oct 23, 2018

    Investment Week at a Glance

    Stocks finished mixed for the week. The Dow Jones Industrial Average was up 0.41%, the S&P 500 rose 0.02%, the New York Stock Exchange Composite (2,000 stocks) was up 0.14% and the average investors index (Value Line Index) was down 0.35%. Foreign stocks (DJ Global ex U.S.) were down 0.28%. Bond prices were lower for the week, pushing the yield on the 10-year U.S. Treasury up 3 basis points to finish the week at 3.19%. (Data sources: Barron’s Financial, Wall Street Journal)

     

    Despite Positive Earnings Reports Stocks End Week Mixed

    Major domestic stock market indices finished the week with mixed results as volatility continued to rear its head. Positive corporate earnings reports helped support gains, particularly during the rally on Tuesday, while political and economic worries on a global scale weighed on market returns.

    Last week, companies that represent approximately 14% of the S&P 500’s market cap released earnings reports. Of particular note, the financial sectors Goldman Sachs and Morgan Stanley both exceeded earnings estimates and helped drive the 2.15% gain on Tuesday. After the large selloffs earlier this month, technology stocks continued to struggle despite positive earnings.

     

    More Rate Hikes in the Works?

    The recently released minutes from the FOMC’s (Federal Open Market Committee) September 25-26 meetings appear to have somewhat of a hawkish tone. A majority of FOMC members believe that in order to combat an overheating economy and rising inflation a more restrictive monetary policy may be needed. 

    The yield on the 10 year Treasury finished the week at 3.19%, remaining below the 7 year high it reached earlier this month. Following positive earnings reports, the lack of new deals helped the banking sector outperform in the investment grade corporate bond space. While the new issuance volumes were restrained, the focus seemed to be on higher quality while limiting exposure top risk. Energy bonds performed well despite Brent crude oil dipping below $80/barrel due to rising inventories.

     

    Quiz:

    One of history’s first speculative bubbles occurred nearly 350 years ago and featured a much unexpected item. What item is thought to have caused history’s first speculative bubble?

    a)    French champagne

    b)    Indian jewelry

    c)    Dutch tulips

    d)    Chinese tea

     

    Have a good week.

     

     

     

     

     

    Answer to quiz:

    c)   Dutch tulips. Tulip mania fascinated the general public in the 1630’s. At its peak, a tulip bulb was worth nearly 10 times the average annual salary of a skilled worker.