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July 2018 Market Recap

The stock market posted its largest monthly gain since January as rising corporate earnings and strong GDP growth numbers helped overcome concerns over tariff and trade issues.

The S&P 500 Index moved up 3.60% in July after several months of lackluster results. Through the first seven months of 2018, the S&P 500 is up 5.34%. (The S&P 500 Index is a market-cap-weighted index that represents the average performance of a group of 500 large-capitalization stocks.)

Here are some other highlights from the past month covered in more detail later in this report:

  • Retail sales up again. Retail sales improved for the fourth consecutive month, with a 0.5% increase in June, according to the U.S. Department of Commerce.
  • Employment gains continue. The economy added more than 200,000 new jobs in June, although the unemployment rate inched up 0.2% to 4.0%, according to the U.S. Bureau of Labor Statistics.
  • GDP growth strong. Gross domestic product (GDP) growth was strong in the second quarter, hitting 4.1% (annualized), according to a report issued July 27 by the U.S. Department of Commerce.
  • 10-year yields rise. Interest rates on 10-year U.S. Treasuries edged up in July, finishing the month at 2.97%.
  • Oil prices recede. After a spike in prices in June, the price of oil declined more than 7% in July as OPEC production picked up.
  • International stocks mount slight recovery. Equities in Europe and Asia regained some footing in July after several months of losses.
In a Nutshell

What’s ahead for the economy and the markets? See: Have ‘FANG’ Tech Stocks Given the Market Bad ‘Breadth’? by Darren Bagwell, CFA, Chief Equity Strategist.

Drilling Down

U.S. Stocks Edge Up

The S&P 500 rose 3.60% in July to finish the month at 2,816.29 – up from 2,718.37 at the end of June.

The total return of the index (including dividends) was 3.72% in July. Through the first seven months of 2018, the total return of the S&P 500 was 6.47%.

The NASDAQ Index continued to move up in July, with a 2.15% gain – despite a drop of nearly 4% in the final days of the month. Year to date, the NASDAQ is up 11.13%. (The NASDAQ – National Association of Securities Dealers Automated Quotations – is an electronic stock exchange with more than 3,300 company listings.)

S&P 500 Index

Retail Sales Continue Positive Trend

Retail sales increased by 0.5% in June from the previous month and 6.6% from a year ago, according to the advance monthly retail sales report issued July 16 by the U.S. Department of Commerce. The April 2018 to May 2018 percent change was revised up from a 0.8% increase to 1.3%.

The increase came in spite of a downtrend in retail store sales, as clothing store sales declined 2.5% for the month, sporting and hobby store sales dropped 3.2%, and department store sales declined 1.8%.

On the positive side, non-store retailers (primarily online) were up 1.3% for the month and 10.2% year-over-year. Food services and drinking places have also done well, up 1.5% for the month and 8.0% year-over-year.

Employers Continue to Hire

U.S. employers added 213,000 new jobs in June, but the unemployment rate rose by 0.2% to 4.0%, the U.S. Bureau of Labor Statistics reported in its Employment Situation report July 6.

Despite the rise in the unemployment rate, it is still at a level that is considered very low by historic standards. The economy has added jobs for 93 consecutive months.

Manufacturing Expansion Continues

U.S. manufacturing activity continued to expand in July for the 23rd consecutive month, according to the Institute for Supply Management (ISM) Report on Business issued August 1. The strong growth in manufacturing was led by continued expansion in new orders, production and employment. “Inventories are expanding at a faster rate as a result of supplier deliveries improving compared to the prior month,” according to Timothy R. Fiore, ISM Chair of the Institute for Supply Management.

Sixteen of 18 industries reported growth in new orders in July, led by printing and related support activities; apparel, leather and allied products; and plastics and rubber products. No industry reported a decrease in new orders in July.

All Sectors Move Up

All 11 sectors of the S&P 500 moved up in July, led by Industrials, Financials and Health Care, which each posted a return of more than 5%.

The chart below shows the results for all 11 sectors for the past month and the year:

S&P 500 Sectors

Treasury Yields Move Up

The market yield on 10-year U.S. Treasuries moved up in July, from 2.85% at the close of June to 2.97% at the end of July.

U.S. Treasury 10-Year Bond Yields

Oil Prices Retreat

After a 10.6% rise in prices in June, the oil market tapered off in July, with prices dropping 7.27% per barrel for West Texas Intermediate (a grade of crude oil used as a benchmark in oil pricing). After closing June at $74.15 per barrel, the price dipped to $68.76 at the end of July.

The drop in prices came, in part, as a result of hints of higher production levels in OPEC’s semi-annual meeting in late June.

Oil Price - West Texas Intermediate

International Equities Make Slight Recovery

After a rocky year, the MSCI EAFE Index recovered modestly in July. The index, which tracks the performance of developed-economy stocks in Europe, Australasia and the Far East, was up 2.42% in July, but is still down 2.18% through the first seven months of 2018.

MSCI EAFE Index

What’s ahead for the economy and the markets? See August Monthly Outlook: Have 'FANG' Tech Stocks Given the Market Bad 'Breadth'?

To see our Market Recaps every month and learn more about our perspective on the markets, subscribe to our Investing Insights newsletter.

 

Media contact: Samantha Mehrotra, 612-844-4197; samantha.mehrotra@thrivent.com

 

 

 

 

All information and representations herein are as of August 1, 2018, unless otherwise noted.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management associates. Actual investment decisions made by Thrivent Asset Management will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product.  Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.

Indexes are unmanaged and do not reflect the fees and expenses associated with active management. Investments cannot be made directly into an index.

Past performance is not necessarily indicative of future results.

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