Investment Commentary – May 1st, 2018

Year to Date Market Indices as of Market Close May 1st, 2018
Dow 24,099 (-2.51%)
S&P 2,654 (-0.70%)
NASDAQ 7,130 (3.29%)
Gold $1,305 (-0.72%)
OIL $67.44 (12.87%)
US 10Y Treasury 2.96 (55.38%)
Barclay Bond Aggregate (-3.50%)

Tech rally lifts S&P 500, Nasdaq; Dow falls for 3rd straight session

U.S. stocks closed mostly higher on Tuesday, as a sharp rally in technology stocks helped the S&P 500 and the Nasdaq shake off an early decline. However, the Dow fell for a third straight session as caution remained high ahead of the conclusion of a Federal Reserve policy meeting and fresh developments in global trade.

What are the main benchmarks doing?

The Dow Jones Industrial Average DJIA, -0.27% fell 64.1 points, or 0.3%, to end at 24,099.05. While the blue-chip average ended well off its lows of the session, having previously dropped more than 1%, it notched third straight daily decline. At its low of the day, the Dow was on track for its lowest close since April 2.

The S&P 500 index SPX, +0.25% rose 6.75 points to 2,654.8, a gain of 0.3%. The Nasdaq Composite Index COMP, +0.91% rose 64.44 points, or 0.9%, to finish at 7,130.70, supported by a rise in Apple and other major technology companies.

Tech was by far the biggest outperformer of the day, with the sector ending up 1.5%. That was enough to offset broad weakness elsewhere, as six of the 11 primary S&P 500 sectors ended lower and other industries saw only modest gains on the day. Among the biggest decliners were consumer staples, which fell 0.9%, and energy, which lost 0.6%.

What’s driving markets?

The Federal Reserve began a two-day meeting Tuesday. When it wraps, the central bank is expected to leave interest rates on hold and signal no change to a tightening path of two more rate increases in 2018. Changes to Fed policy—in addition to interest rates, the U.S. central bank is shrinking the size of its balance sheet—are widely seen as one of the biggest headwinds facing markets.

Growth moderates

The U.S. government’s initial estimate of first-quarter GDP growth showed the economy expanded at a 2.3% annual rate, marking the second quarterly slowdown in a row. Most economists had predicted a pullback, and Friday’s figure was slightly higher than expected. In last year’s fourth quarter, growth was 2.9%.

Around the Web:

Earnings scorecard: With more than half of the companies in the S&P 500 having reported first-quarter results, the index was on track to post earnings growth of 23% over the same quarter a year ago, according to FactSet. At the start of earnings season, profits were expected to rise around 18%.

Upcoming events:

Wednesday: U.S. Federal Reserve Board concludes two-day policy meeting

Other Notable Indices (YTD)

Russell 2000 (small caps) 0.96
EAFE International 0.72
EAFE Emerging Markets 1.43
Shiller Annuity Index 3.55

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.