Friday was a record-setting day for the stock market, with the S&P 500 (+0.6%) notching its first record close (2874.69) since January 26. The Nasdaq (+0.9%) also registered a fresh record finish, as did the small-cap Russell 2000 (+0.5%). The Dow (+0.5%) advanced, but finished about 3.0% below its January record high.
The market extended opening gains after Fed Chairman Jerome Powell didn't say anything upsetting in his speech at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyoming. Mr. Powell reiterated that gradual rate hikes remain appropriate, adding that he doesn't see any signs that inflation is getting out of hand.
On the international front, investors brushed off news that two days of trade talks between the U.S. and China ended on Thursday without any visible sign of progress. That result was expected as President Trump said beforehand that he didn't believe much would come from the negotiations.
Separately, President Trump tweeted on Friday afternoon that he's asked Secretary of State Mike Pompeo not to go to North Korea because there has not been sufficient progress with respect to the decentralization of the Korean Peninsula. The stock market had a muted reaction to the tweet.
Wall Street's gains were broad-based on Friday with 10 of 11 sectors advancing.
The lightly-weighted materials sector (+1.2%) was the top-performing group, followed closely by the top-weighted technology sector (+1.1%). Within the tech space, software company Autodesk (ADSK 157.20, +20.89) spiked 15.3% after reporting better-than-expected earnings and revenues on Thursday evening.
In other earnings news, retailers dominated the headlines once again with Gap (GPS 29.65, -2.79) and Foot Locker (FL 48.32, -4.88) tumbling 8.6% and 9.2%, respectively, and Buckle (BKE 26.55, -1.25) dropping 4.5% in reaction to their quarterly results. Conversely, Ross Stores (ROST 95.09, +0.06) ticked up 0.1%.
The consumer staples sector (-0.2%) was the lone decliner, but financials (+0.3%), industrials (+0.4%), and utilities (+0.4%) also underperformed.
Looking at other markets, U.S. Treasuries finished slightly lower, pushing the benchmark 10-yr yield up one basis point to 2.83%. Meanwhile, the U.S. Dollar Index gave back nearly all of Thursday's rebound, dropping 0.5% to 95.05, and West Texas Intermediate crude futures jumped 1.2% to $68.66/bbl.
Reviewing Friday's economic data, which was limited to July Durable Goods Orders:
- July durable goods orders declined 1.7% (Briefing.com consensus -0.6%), and the prior month's reading was revised to +0.7% (from +1.0%). Excluding transportation, durable orders increased 0.2% (Briefing.com consensus +0.4%) to follow the prior month's revised reading of +0.1% (from +0.4%).
- The key takeaway from the report is that the headline decrease masked a 1.4% increase in orders for nondefense capital goods, excluding aircraft, which is a positive sign about business spending
Looking ahead, investors will not receive any notable economic data on Monday.
- Nasdaq Composite +15.1% YTD
- Russell 2000 +12.4% YTD
- S&P 500 +7.5% YTD
- Dow Jones Industrial Average +4.3% YTD
Week In Review: Back to Record Territory
The S&P 500 advanced 0.6% this week, closing Friday at a new record high for the first time since January 26. Political uncertainty, trade ambiguity, and strengthened expectations for two more rate hikes this year all failed to dissuade motivated buyers, who pushed stocks higher in three of the week's five sessions.
As for the other major averages, the Nasdaq and the Russell 2000 also notched new records, adding 1.7% and 1.9%, respectively, while the Dow climbed 0.5%.
The week started on a mildly positive note, with stocks ticking higher on Monday and Tuesday, but investors were cautious over the next two sessions, largely due to the legal woes of President Trump's former campaign manager, Paul Manafort, and longtime personal lawyer, Michael Cohen.
Mr. Manafort was convicted of tax and bank fraud on Tuesday afternoon, while Mr. Cohen pleaded guilty to a range of charges, including tax fraud and excessive campaign contributions, and implicated the president directly by saying that Mr. Trump directed him to pay two women hush money "for the principal purpose of influencing the election."
It's too early to say what these developments will mean for President Trump's political future, but it's worth noting that the president chose to say, in regards to the situation, that the market would crash "if I ever got impeached" and that "I don't know how you can impeach somebody who has done a great job."
Moving on to the trade front, two days of trade talks between the U.S. and China wrapped up on Thursday without any visible sign of progress. President Trump said beforehand that he wasn't expecting much to come out of the talks, which marked the first official negotiations since a breakdown nearly three months ago.
In monetary policy, President Trump reiterated his displeasure with the Fed on Monday, saying he was "not thrilled" with Fed Chair Jerome Powell for raising rates.
Two days later, the Fed released the minutes from the July/August FOMC meeting, which only strengthened the expectation that the U.S. central bank will hike rates at its September meeting, with officials saying in the minutes that it would likely "soon" be appropriate to raise rates.
Then, on Friday, Fed Chairman Powell gave a speech at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyoming, saying that gradual rate hikes remain appropriate. Mr. Powell also expressed confidence in the economy and said he doesn't see any signs of inflation getting out of hand.
Seven of eleven sectors advanced this week, with cyclical groups showing relative strength. The energy sector (+2.6%) was the top performer -- rebounding from last week's 3.6% tumble -- helped by an increase in crude prices; West Texas Intermediate crude futures climbed 4.2% this week to $68.66 per barrel.
Meanwhile, the consumer discretionary sector (+2.0%) also outperformed amid a steady flow of retail earnings. TJX (TJX) jumped 4.7% on Tuesday after reporting better-than-expected results, while Lowe's (LOW) and Target (TGT) added 5.8% and 3.2%, respectively, on Wednesday after also beating estimates.
On the downside, the four declining sectors were consumer staples (-1.8%), utilities (-1.4%), telecom services (-0.7%), and real estate (-1.1%).