Wall Street continued to rally as Jerome Powell reaffirmed at the semi-annual testimony to the U.S. Congress that the Federal Reserve was worried about the economy and would act as “appropriate” to sustain the economic expansion. In a nutshell, a dovish speech endorsing a rate cut at the end of the month and bolstering investors’ expectations accordingly.
This was all it took for the broad-based indices to hit all-time highs and U.S. equity ETFs to collect large inflows. Thus the S&P500 cracked 3,000 for the first time in history (3,013.77, +0.78% WTD), the Nasdaq composite jumped 1.01% to 8,244.15 and the DJIA climbed 1.52% to 27,332.03.
By contrast, Asian and European indices dipped into negative territory (MSCI EMU: -0.86% ; Nikkei225: -0.28% ; Shanghai Composite: -2.67%).
The major sector trading higher was energy (+2.16% WTD) due to the storm that cut by more than half the oil production in the Gulf of Mexico as well as the drawdown in crude stockpiles announced by the U.S. Energy Information Administration which was about 3x above market expectations. WTI crude futures ended the week up 4.69% at $60.21 a barrel.
It was more difficult for health care (-1.43% WTD). If health-insurance stocks rallied (UnitedHealth Group in particular) on the news that the Trump administration had abandoned a push to end rebates paid to middlemen who negotiate drug prices on behalf of health insurers, on the other hand drugmakers such as Merck, Johnson&Johnson, and Pfizer nose dived.
Real estate and utilities stocks were also lower as the U.S. 10-year T-bond yield rose from 2.04% to 2.12% (vs. 2.14% for the 3-month T-bill), the yield curve steepening suddenly. Same trend in Europe with the German 10-year bond yield coming back to -0.21% (vs -0.36% a week ago) and the French OAT yield moving higher from -0.08% to +0.06%.
Lastly, it is worth noting that gold futures settled back above $1,400/oz ($1,412.20).
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2019-07-12/global