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Jul 27 2018

7/27/18 Market Notes

In spite of a very visible and painful earnings miss by Facebook (FB) that sent the NASDAQ more
than 1% lower on Thursday, the overall earnings picture appears to remain intact. Intel (INTC),
Starbucks (SBUX) and Amazon (AMZN) all handily beat earnings expectations after the closing bell
rang on Thursday, and overall nearly 80% of the companies that have reported earnings so far have
exceeded expectations (according to FactSet).

The Dow Jones Industrial Average gained more than 100 points or nearly ½% while the S&P 500 fell
0.3%. Driven by Facebook’s near 20% decline for the day, the technology sector lost 1.64%, while the
utilities sector gained 1.14% as seven of the eleven sectors of the S&P gained ground.

On the economic front, the June Durable Goods Orders report fell significantly short of expectations,
showing a 1% rise in orders versus an expected rise of 3%. May orders were revised up slightly, but
remain negative. As many expected, transportation equipment orders (airplanes) led the way as the
fear of additional tariffs front-loaded orders.

U.S. GDP grew by 4.1% in the second quarter, slightly ahead of the Atlanta Fed’s 3.8% estimate but
below the consensus estimate of 4.4%. First quarter GDP was revised upward to 2.2%, as strong
government spending and robust consumer spending helped boost the expansion (corporate
expenditures were below forecast). Treasury yields and the U.S. dollar are slightly lower on the news.
While oil prices have risen more than 15% year-to-date, the increase has not fueled energy company
earnings as much as expected. Both Exxon Mobil (XOM) and Chevron (CVX) reported disappointing
results this morning, missing both top and bottom line estimates. Oil priced ended the day up 31 cents
(about ½%) to $69.61, and are down slightly in early morning trading.


The GGFS Investment Committee