U.S. stocks ended the week mixed for the second week in a row although this time blue chips had the edge over tech stocks.
The Dow rose 1.4%, its best weekly increase in three weeks, after climbing 1.6% on Thursday, its biggest daily gain since April. The S&P 500 rose 0.6%. NASDAQ, however, was the laggard, losing 0.3%, its first loss in three weeks. The index was dragged down by one of its highest-flying stocks, Tesla, which plunged nearly 9% on Friday and 14% for the week after the SEC said it was looking into CEO Elon Musk’s public assertions about taking the company private and a rambling interview he gave to the New York Times, which raised questions about his health, possible drug use and workload. Smaller cap stocks, which are less affected by foreign trade issues, were strong again. The S&P SmallCap 600 rose 1.0%, its third weekly gain in a row, while the MidCap 400 gained 0.7%. Bonds were little changed on the week.
Foreign stocks continued to underperform their American counterparts. Chinese stocks resumed their losing ways. After rebounding about 2% the prior week following a 4% drop the week before that, both Shanghai and Hong Kong stocks dove more than 4% last week as trade concerns continued to batter the market. Shanghai is down more than 19% so far this year and ended the week at its lowest closing level since January 2016. Hong Kong is off by 9% year to date. European stocks fell for the third straight week as the region continued to suffer from contagion from Turkey’s financial woes. The Stoxx Europe 600 fell 1.2%, its biggest weekly loss since the last week of June. Italian stocks have been among the hardest hit, as the MIB index dropped 3.2%; the index is down more than 8% so far this month. Italian government bonds have also been under pressure. The yield on the 10-year government bond jumped another 13 basis points last week to 3.12%, up 65 bps over the past month and its highest level since April 2014.
Reports on the U.S. economy were decidedly mixed. On the plus side, retail sales jumped a better-than-expected 0.5% in July after rising a downwardly revised 0.2% in June, which was originally reported as a 0.5% gain. Yet the University of Michigan’s mid-August consumer sentiment index dropped more than 2.5 points to 95.3, its lowest level in nearly a year, largely due to shoppers’ concerns about rising prices. The Conference Board’s index of leading economic indicators rose 0.6% for July, stronger than forecast, but industrial production rose a weaker-than-expected 0.1% after climbing an upwardly-revised 1.0% in June. Housing sector indicators were likewise mixed. Both housing starts (up 0.9% to an annual rate of 1.168 million units) and building permits (+1.5%) were both higher in July, but the National Association of Home Builders’ confidence index fell a point to 67 last month.
Reports/dates/facts/links worth paying attention to over the next week:
1. August 22: Existing home sales for July; the minutes of the Federal Reserve’s July 31-August 1 monetary policy meeting are announced at 2:00 P.M. EST.
2. August 23: Weekly unemployment claims; new home sales for July; the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Wyoming, begins.
3. August 24: Durable goods order for July.