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Market Outlook

Dow Jones, S&P 500, Nasdaq: top risers, fallers and this week’s outlook

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.    
 

2.3%

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. 
 

9.28%

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
 
Netflix [NFLX] was among the Nasdaq’s best performers last week, rising more than 8.6% over the five days to trade at $369.21 by Friday’s close. The rest of the FAANGs – Facebook [FB], Amazon [AMZN], Apple [AAPL] and Alphabet [GOOGL] – were also up by 5.4%, 2.2%, 3.1% and 3.6% respectively during the same period.
 
 
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. 
  
Walt Disney [DIS] and United Technologies Corporation [UTX], meanwhile, were among the worst performers on the index, both falling 1.24% to $140.26 and 0.98% to $128.76 on Thursday.
 
 
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.
 
US stocks scheduled to report earnings later this week include Nike [NKE], Walgreens Boots Alliance [WBA], Constellation Brands [STZ] and Accenture [ACN].
 
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.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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