May 11, 2018 Weekly Market Recap

Buyers returned to the market this week following a three-week absence during the thick of the first quarter earnings season. The S&P 500, Dow Jones, and Nasdaq finished with sizable weekly gains, adding between 2.3% and 2.7% apiece – enough to put the S&P 500 and the Dow back into positive territory for the year. The Nasdaq is now up 7.2% year-to-date.

The stock market got off to a slow start this week as investors digested President Trump’s decision to pull the U.S. out of the Iran nuclear agreement and restore the “highest level of economic sanctions” against Iran. The president was scolded by European allies, which wanted the U.S. to remain in the agreement, while Iran’s response was more violent with lawmakers burning the American flag in parliament.

Tensions in the Middle East were further escalated later in the week when Israel struck nearly all of Iran’s military infrastructure in Syria in response to an Iranian missile attack on Israeli-held territory.

Outside of a brief pause, stocks had a mostly muted reaction to the headlines, but crude oil futures took off, with WTI crude establishing a new three-and-a-half year high, as the restoration of U.S. sanctions on Iran and the looming threat of conflict within the oil-rich region prompted investors to bet on a disruption to crude supply on the global market.

The S&P’s energy sector benefited from the rise in oil prices, adding 3.8% this week, but the industrials, technology, and financials sectors finished with similar weekly gains, adding between 3.4% and 3.6%. In total, nine sectors finished the week in the green.

Stocks took off on Wednesday and carried that momentum into Thursday’s session; the S&P 500 added 1.9% in those two days alone, catapulting above its 50-day moving average to a nearly two-month high. Technology shares rallied over that two-day stretch, reminiscing last year’s tech-charged surge, with Apple (AAPL) extending its streak of record closes to five in a row on Thursday.

Investors received some important inflation data on Thursday – namely, the Consumer Price Index for April – which helped further fuel the bullish bias, coming in slightly below estimates, and thereby tempering concerns that the Fed might have to be more aggressive in its path to normalization.

Overseas, the Bank of England voted 7-2 in favor of keeping its official bank rate and its asset purchase program unchanged on Thursday, but BoE Governor Mike Carney added that interest rates will likely go up by the end of the year. Separately, President Trump announced that his summit with North Korean Leader Kim Jong Un will be held on June 12 in Singapore, a positive stride in the quest for global peace.

The stock market ended the week on a positive, with the S&P and Dow Jones gaining. The Nasdaq was down slightly.

Source: Briefing Investor