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Market Summary

U.S. equities continued their negative slide this past week with depressed sentiment resulting from growing trade tensions still cited as the largest factor along with some weak economic data out of the U.S. and Europe. For the week, the Dow Jones fell for the fifth straight week with a loss of -0.7%, while the S&P 500 and Nasdaq Composite finished -1.2% and -2.3% lower, the third week of consecutive losses for the latter indices. Growing risk-off sentiment drove a greater number of investors to the safe haven of U.S. Treasury bonds with the 10-year Treasury yield closing the week down 0.06% at 2.33%. Greater demand increases bond prices while decreasing bond yields.

The largest detractors from stock performance this past week were the energy sector, which had its worst week of the year with the S&P sector posting a -3.5% loss, followed by the trade-sensitive sectors of consumer discretionary, information technology, and industrial companies. These sectors sold off sharply on Thursday, the same day that the Federal Reserve Bank of New York reported that the imposed tariffs on Chinese imports would cost the average U.S. household $831 a year. Defensive sectors, including utilities and health care companies, offset some of the losses and eked out positive returns as demand for their products and service is less cyclically sensitive and less vulnerable to disruption from the trade dispute.

In the U.K., British Prime Minister Theresa May failed to deliver her latest attempt at a Brexit withdrawal bill amid concession disagreements within her conservative party, resulting in her announcement that she will retire as Prime Minister on June 7, potentially further delaying the Brexit process. The process for electing a new leader will begin this week.

Economic Highlights:

Oil: Crude oil prices fell sharply on concerns that the trade dispute could weigh on economic growth and demand for oil products. WTI crude oil prices fell -6.6% on the week, closing at $58.61 per barrel.

Manufacturing: The U.S. manufacturing Markit Purchasing Managers’ Index (PMI) fell unexpectedly to 50.6, just above the 50 level that marks the cutoff between contracting and expanding growth, and below expectations for a reading of 52.7. The index was driven down by a slump in new domestic and foreign orders for durable goods.

US Economy – The Week Ahead

Tuesday, 5/28/2019

  • S&P/Case-Shiller Home Price Index Year-over-Year Growth – Consensus Estimate: 2.3%, Prior Month: 3.0%

Wednesday, 5/29/2019

  • No Data

Thursday, 5/30/2019

  • Initial Jobless Claims – Consensus Estimate: 212,500 (0.7% WoW), Prior Week: 211,000 (-0.5% WoW)
  • U.S. First Quarter 2019 GDP Growth Year-over-Year (Second Preliminary) – Consensus Estimate: 3.2% (3.2% QoQ), Prior Quarter: 3.0% (2.2% QoQ)
  • Pending Home Sales Index – Consensus Estimate: 103.9 (-1.8% MoM), Prior Month: 105.8 (3.8% MoM)

Friday, 5/31/2019

  • Personal Consumption Expenditure (PCE) Deflator Year-over-Year Growth – Consensus Estimate: 1.6%, Prior Month: 1.5%
  • University of Michigan Consumer Sentiment Survey (Final) – Consensus Estimate: 102.0 (4.9% MoM), Prior Month: 97.2 (-1.2% MoM)
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