The S&P 500 went on a five-day climbing streak last week, rising 2.57% to reach a new intraday all-time-high of $2964.15 on Friday, as investors reacted to the US Federal Reserve’s more dovish stance and the prospect of a breakthrough in the US-China trade talks at the G20 meeting at the end of this week.
Gains in the technology sector helped the Nasdaq and Dow Jones climb 3% to $8031.71 and 2.3% to $26719.13 respectively, marking their highest trading levels since 3 May 2019 and 3 October 2018.
The Dow Jones' climb last week
Amid a significant roster of central bank meetings, Fed chairman Jerome Powell announced that interest rates would be left unchanged at a range of 2.25%-2.5%. Powell pushed back on market expectations and presidential pressure on Tuesday, saying that the central bank was insulated from “short-term political pressures”.
When asked about disappointing markets by not delivering a cut, Powell went on to say, “we’re not in the business, really, of trying to work through short-term movements in financial conditions. We have to look through that”.
Ahead of the Fed’s announcement on Tuesday, investors had priced in multiple rate cuts, sending the 10-year treasury note yields below 2% – their lowest since October 2016. Gold futures, meanwhile, ended the week at their highest level since 2013, at $1432.30 an ounce.
S&P 500: energy stocks rise
Energy shares got a boost from higher oil prices last week, propelling shares in Noble Energy [NBL]
up nearly 9% over the five days to $21.56. Shares in oil incumbents Exxon Mobil [XOM]
and Chevron Corporation [CVX]
were also up 4.2% to $77.69 and 3.4% to $124.93 respectively during the same period.
Noble Energy's price climb from 14 to 21 June's close
Oil prices remain hot as the US imposed further sanctions on Iran, following news that a US drone had been shot down in the country, escalating tensions. Futures for the global benchmark Brent Crude rose just over 5% throughout the week to $65.34 per barrel. Oil traders are in murky water, however, as concerns over excess supply increase amid a global economic growth slowdown.
Travel related stocks, on the other hand, were the worst S&P 500 performers, with cruise operators Carnival [CCL]
and Royal Caribbean Cruises [RCL]
falling 12.2% to $46.63 and 7.5% to $114.84 respectively, after Carnival lowered its full-year guidance.
Nasdaq: FAANGs up, chipmakers down
Another top performer was Oracle [ORCL]
, which reported a quarterly profit of $1.16 per share on 19 June, beating estimates by $0.09. Its stock had shot up by 8.18% to $56.99 by the next day’s close.
Chip stocks, meanwhile, fell after the US Commerce Department barred five additional Chinese companies from buying US components without approval. The move comes off the back of the Huawei ban and sent shares in Micron Technology [MU]
, Advanced Micro Devices [AMD]
and Xilinx [XLNX]
all down by more than 2% on 21 June.
Dow Jones: risers and fallers
With the Dow Jones on track for its best month since October 2015 and its best June since 1938, its top gainers lodged strong performances last week including Microsoft [MSFT]
and Cisco [CSCO]
Microsoft’s stock rose 3.4% over the course of last week, extending its YTD gains of around 35%. The computer giant trades at nearly 27 times its 2020 earnings estimates, however, suggesting it may be overvalued.
While it’s worth noting that the company has a solid track record of beating market estimates, Jefferies analyst John DiFucci argues that its cloud business’s profitability may never match Amazon’s AWS. DiFucci’s bearish note sent its shares down 3.15% to $133.43 by Tuesday’s close.
As for Cisco, the technology conglomerate’s stock rose 4.16% during the same period and with it selling at 19 times its earnings estimates, now could be the time to buy in anticipation of a breakout.
What to look out for in US indices this week?
The G20 meeting will be the focus this week with investors poised to see how the meeting between Donald Trump and Xi Jinping goes. Investors will also be watching how the US and Iran tensions play out.
Lindsey Bell, investment strategist at CFRA Research, believes the market could be setting itself up for a fall in the near-term. “If expectations are for [trade] talks to resume [between the US and China], that’s one thing. But if the expectations are for significant progress or indications they may be close to a deal, I think there will be major disappointment,” Bell told CNBC.