Investment Commentary –July 31, 2018

Year to Date Market Indices as of Market Close July 31,2018
Dow 25,415 (2.82%)
S&P 2,816 (5.34%)
NASDAQ 7,671 (13.58%)
Gold $1,233 (-7.20%)
OIL $68.29 (15.81%)
Barclay Bond Aggregate (-1.69%)
Fed Funds Rate 2.0% (last increase was 6/13/18)

Stocks rise broadly with earnings in view; indexes set for 4th straight positive month

U.S. stocks rose on Tuesday, with major indexes rebounding from recent weakness as corporate earnings continued to come in strong. The main indexes are on track to book solid monthly gains.

What are the main benchmarks doing?

The Dow Jones Industrial Average DJIA, +0.43% rose 171 points, or 0.7%, to 25,479. The S&P 500 SPX, +0.49% added 19 points to 2,822, a gain of 0.7%. The Nasdaq Composite Index COMP, +0.55% was up 63 points, or 0.8%, to 7,693.

Both the S&P and the Nasdaq are aiming to end a three-day losing streak, while the Dow has posted two consecutive losing sessions. The day’s gains were broad-based, with nine of the 11 primary S&P 500 sectors higher. Among the top-performing sectors were industrials, which rose 2.2%, and health care, up 1%.

With Tuesday marking the final trading session for July, the Dow is posting a 5% monthly gain, while the S&P and Nasdaq have tacked on 3.8% and 2.4%, respectively. Both the S&P and the Nasdaq are poised for their fourth straight monthly gain.

Apple’s earnings impress and the stock is rising in after-hoApple reported its fiscal third quarter earnings on Tuesday.

Typically, the three months ending in June are the slowest in terms of iPhone sales and revenue, but this year, Apple posted the strongest third quarter in company history, beating analyst expectations for earnings per share and revenue. However, iPhone and iPad sales were mostly unchanged from the same period last year. Mac sales were down 13%. Apple CFO Luca Maestri said that the company “returned almost $25 billion to investors through our capital return program during the quarter, including $20 billion in share repurchases.”

Apple also said that it expected revenue next quarter to be between $60 billion and $62 billion, beating Wall Street expectations, and at its midpoint would be a 15% year-over-year increase. That suggests a return to a September launch for new iPhone models.

Apple’s “services” business, which includes iCloud, Apple Music, and App Store, rose 31% year over year to $9.54 billlion.

Apple shares rose in extended trading. urs trading (AAPL)

White House Not Actively Weighing Capital Gains Tax Change, Source Says

The White House isn’t actively considering the Treasury Department’s push to issue a rule that would slash tax bills for investors who have investment income, according to a person familiar with the discussions.

Treasury Secretary Steven Mnuchin told the New York Times earlier this month that his agency was looking at whether it could sidestep Congress to allow capital gains to be indexed to inflation. The change has appeal to some segments of President Donald Trump’s base, but White House officials are aware it would face an immediate legal challenge and has a narrow chance of being sustained, said the person who requested anonymity.

In another sign that the effort was largely confined to Treasury, White House Chief of Staff John Kelly wasn’t actively seeking the change as of Monday, a White House official said.

Economy surges: The U.S. economy grew by 4.1% in the second quarter, besting its revised projection of 2.2% from the first quarter. Trade played a significant role in the increase, the largest growth spurt since the 4.9% result seen in the third quarter of 2014.

Savings rate climbs: The latest savings rate figures from the Bureau of Economic Analysis show that Americans socked away 6.7% in 2017, up from the 3.4% it had originally reported. The reason? Bigger paychecks, which have risen by 3.5% annually over the last five years.

Mixed housing reports: Sales of existing homes fell for the third straight month, down 0.6% in June; however, the overall homeownership rate continues to rise, finishing the second quarter at 64.3%, an increase of 0.6% over the past year.

Other Notable Indices (YTD)
Russell 2000 (small caps) 8.38
EAFE International -0.09
Emerging Markets -2.54
Shiller Annuity Index 9.03

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.