Stocks Advance on Rumors of Iran Deal; Bonds Mixed
Good morning,
The Dow (+2.1%), NASDAQ (+0.5%), S&P 500 (+0.9%), and EAFE (+2.2%) all gained modestly for the week. Meanwhile, taxable bonds gained 0.3% while tax-free municipal bonds fell 0.3%. The 10-year Treasury yield fell 0.03% to finish the week at 4.56%.
Corporate earnings season has mostly concluded, with the biggest of them all, Nvidia, reporting its earnings last week. The much-anticipated earnings report didn’t disappoint, as its sales and earnings were up 85% and 146% over the prior year, respectively, and exceeded expectations. Despite posting extraordinary earnings that also exceeded expectations, it apparently has become ho-hum with investors, as the stock barely moved afterward. Nvidia is the world’s leading chip manufacturer and a bellwether indicator for AI growth. If the markets become accustomed to off-the-chart earnings, what could happen to that stock (and the other AI-related stocks) if earnings come in weaker? That day has to eventually come, because no company (especially mega large ones) can maintain that pace of growth.
The conflict in Iran continues, and despite rumors of a deal being 95% there, US air strikes on Iran resumed overnight. Regardless, the hopes of a deal and re-opening of the Strait of Hormuz have caused oil prices to slip over the weekend, but still remain very high. Higher oil and energy prices continue to provide the biggest economic risk right now to the US economy, as it has caused inflationary pressure and subsequent concerns for a slowdown in consumer spending, as evidenced by Walmart’s earnings call over a week ago. In a holiday-shortened week, the Fed-favored inflation gauge Personal Consumption Expenditures (PCE) will be reported on Friday, and all eyes will be focused on that data.
Have a great day and terrific week!
Source: Yahoo Finance
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
