S&P 500; US Indexes Fundamental Weekly Forecast – Energy, Health Care, Financial Sectors In Play This Week
The major U.S. stock indexes finished relatively flat for a third week as news regarding the Trump administration’s policy changes were met by muted reactions from investors. Rallies in health care and tech shares offset a plunge in energy stocks.
In the cash market, the blue chip Dow Jones Industrial Average closed at 21,394.76, unchanged. It’s up 8.3% for the year. The benchmark S&P 500 Index settled at 2,438.30, up 0.2%. For the year, it’s up 8.9%. Finally, the tech-based NASDAQ Composite ended the week at 6,265.71, up 1.8%. It’s up 16.4 in 2017.
Health care shares in the S&P 500 Index posted their best week since November amid signs the Trump administration won’t come after the pharmaceutical companies and drug prices and some positive lab results from biotech firms.
Weakness in energy prices was a major a major theme throughout the week, with crude oil in New York and London falling into a bear market on concerns that expanding supply in the U.S., Libya and Nigeria will offset the OPEC-led production cuts. The energy sector slumped more than 3 percent for their worst week since February 2016.
As far as geopolitical events were concerned, investors showed little reaction to the start of the Brexit negotiations.
In other news, the Federal Reserve Board announced that all 34 banks tested passed the quantitative portion of this year’s stress test.
Forecast
The current low volatility has caused some investors to become more complacent lately. Some have taken advantage of this situation by rebalancing their portfolios. This has become evident with the recent shift in capital from top-performing technology stocks into underperforming sectors with the hope of finding other opportunities.
We could continue to see more sector rotation this week as investors begin to prepare for the start of the summer trading market. The main sectors to watch this week are energy, health care and financials.
Energy stocks could come into play because of the crude oil market. We could see additional volatility this week because of aggressive short-covering caused by severely oversold conditions, or another steep sell-off due to concerns over rising production.
The health care sector could also be a mover because of the Republican plan to abolish Obamacare and replace it with something it has developed.
Finally, the last of the stress tests will take place next week. Last week’s results suggest the 34 banks tested appear to have enough capital to return cash to shareholders. The second more critical part of the test happens this week when the central bank announces whether it approves of the banks’ capital plans.
I expect the major indices to remain range bound this week going into the U.S. 4th of July holiday. We could see reactions to the Core Durable Goods Orders report, Consumer Confidence and Final GDP. Fed Chair Janet Yellen is also scheduled to speak.
This article was originally posted on FX Empire
