U.S. stocks advanced Friday as investors monitored the G-20 summit in Osaka, Japan.
The three major indices closed out the session logging their best performances in the first half of the year in decades. Friday was the last equity trading session of June and the close of the first half of 2019.
As of market close, the S&P 500 (^GSPC) was up 17% in the first six months of the year, its best first-half performance since 1997. The Dow (^DJI) rose 14% over the six-month period to round out its best showing since 1999. And the Nasdaq (^IXIC) rose more than 20%, marking its best first six months to the year since 2003.
Friday also marked the first of two days of the G-20 summit in Japan, with President Donald Trump and China’s Xi Jinping set to meet on Saturday, in what investors hope will be an encounter that lays the groundwork for a future trade deal between the two countries.
Equities have drifted in the days leading up to the meeting, with traders pricing in the prospect of little meaningful progress to be made during the leaders’ encounter.
“It seems likely that Presidents Trump and Xi will agree to another tariff ceasefire on the sidelines of this weekend’s G-20 summit,” Capital Economics’ Jennifer McKeown wrote in a note Thursday. “But given the differences between the two sides, we suspect that any truce will prove temporary.”
“The conclusions of the summit itself are likely to be vague, with the group still divided over the way forward on issues like WTO reform, climate change and sustainable investment,” she added.
UBS analysts wrote in a note Tuesday that their base case was for China and the U.S. to pick up negotiations after the G-20 summit, with no further escalation in tariffs for the time being. Bank of America Merrill Lynch analysts called achievement of a major deal “quite unlikely given the big disagreements and the lack of motivating pressure from the markets,” with equities near all-time highs.
Elsewhere, gold prices (GC=F) continued to climb amid more dovish posturing from the Federal Reserve and European Central Bank and rising geopolitical tensions. With prices up about 8% this month, the precious metal posted its largest monthly gain since June 2016, when investors piled into the safe haven asset after the U.K. vote to leave the European Union.
Crude oil prices (CL=F) have also been on the ascent in June amid rising tensions between the U.S. and Iran and recent government reports pointing to smaller stockpiles. West Texas Intermediate crude oil futures settled at $58.47 per barrel on Friday and ended higher by about 9% in June, marking the best month for the commodity since January.
STOCKS
The FTSE Russell indices will rebalance after market close on Friday, impacting the components of the Russell 1000, 2000 (^RUT), 3000 and Microcap indices, as well as the index funds and ETFs that track these. The reconstitution typically drives higher-than-average volumes, especially toward the end of the trading day. Newly public companies Uber (UBER), Lyft (LYFT) and Spotify (SPOT) are among the companies entering the Russell 1000 after market close, according to a release from FTSE Russell earlier this month.
Nike (NKE) reported fiscal fourth-quarter earnings per share that missed consensus expectations, while posting stronger-than-expected sales results in North America and China. The stock recovered some losses despite the earnings miss after the company guided toward margin expansion in fiscal 2020 and doubled down on its commitment to invest in the Chinese market over the coming quarters, including with a roll-out of a women’s apparel line for Asian markets and Nike app launch in China in the first half of 2020.
The logo of Dow Jones Industrial Average stock market index listed company Nike (NKE) is seen in Los Angeles, California, United States, April 12, 2016. REUTERS/Lucy Nicholson
Apple (AAPL)announced Thursday evening that its Chief Design Officer Jony Ive would be departing the company after 27 years to start his own business, which will continue to work with the iPhone-maker.
“This news only adds to the current agita around the Apple story as the company is branching out into television and gaming all while it is currently the poster child for the U.S./China UFC trade battle on the heels of the G-20 summit,” Wedbush analyst Dan Ives wrote in a note.
Constellation Brands (STZ), the maker of Corona and ModeloEspecial beers, reported fiscal first-quarter comparable earnings per share that topped Wall Street’s expectations. The company raised profit guidance for the full year to between $8.65 and $8.95 per share, an increase of 15 cents from the previous range. Constellation’s first-quarter comparable EPS of $2.21 per share topped consensus expectations by 16 cents. The company said profit in the quarter was impacted by its investment in Canopy Growth Company (CGC, WEED.TO), the world’s biggest cannabis company.
ECONOMY
Consumer spending, which accounts for 70% of U.S. economic activity, rose 0.4% in May amid higher expenditures on motor vehicles and food services and accommodations, according to the Commerce Department. April’s consumer spending data was upwardly revised to see a 0.6% gain, up from the 0.3% increase previously reported.
Meanwhile, personal income rose 0.5% in May, or unchanged from the previous month. This was stronger than the 0.3% gain expected by consensus economists. The personal consumption expenditures (PCE) index, which measures consumer price changes, rose 0.2% month-over-month in May and 1.5% over last year. Core PCE, the Fed’s preferred inflation gauge that excludes volatile food and energy categories, rose 1.6% year-over-year in May, slightly above the 1.5% pace expected.
Consumer sentiment declined less-than-expected from May to June, according to the University of Michigan’s final print on its Survey of Consumers. The index logged a reading of 98.2 for June, better than the 97.9 reading reported in a previous print, but below the 100.0 the index registered in May.
“June's small overall decline was entirely due to households with incomes in the top third of the distribution, who more frequently mentioned the negative impact of tariffs, cited by 45%, up from 30% last month,” Richard Curtin, Surveys of Consumers chief economist, said in a statement. “Most of the June slippage was concentrated in prospects for the national economy, with the unemployment rate expected to inch upward instead of drifting downward in the year ahead. Interest rates were anticipated to rise by the fewest respondents in six years, and declines in mortgage rates have begun to have a positive impact on home buying.”
