The S&P 500 finished higher on Friday and rose 2.5% for the week, despite some mixed MACRO economic data. On Friday, the preliminary June Michigan Consumer confidence Index hit its highest level in more than two years in June, though retail sales unexpectedly fell in May for the first time since September.
MACRO data points for the week pertaining to the consumer pointed to mostly weaker trends. Consumer credit trends, mortgage applications, initial jobless trends and retails sales all showed softness. Coming into Friday’s release of retail sales, consumer spending had been one bright spot since last October. May Retail Sales declined 1.2% vs. consensus of 0.2%; ex-Autos (1.1%) vs. consensus 0.1%. April Retail Sales was revised downward to 0.6% from 0.4%; ex-Autos revised upward to 0.6% from 0.4%.
In contrast to the weakening macro data points, confidence showed stronger trends. On Wednesday last week, the ABC confidence numbers showed a slight tick positive and on Friday the preliminary June Michigan Consumer Confidence also improved. June University of Michigan Confidence (prelim) 75.5 vs. consensus 74.5; the final May reading was 73.6.
Technology shares climbed for a second consecutive day, and the NASDAQ ended up roughly where it started on Monday. Strong results and optimism from chipmakers attempted to stifle concerns around a slowdown in the space. Pharma rallied around numerous upgrades and investors taking on new risk.
On Friday, the three best performing sectors were Materials (XLB) up 1.1%, Technology up 0.9% and, Healthcare up 0.81%. With the S&P 500 up 2.5% on the week, the Hedgeye Risk Management models now have Energy (XLE) and Utilities (XLU) positive on TRADE; there are no companies positive on TREND. The three worst performing sectors on Friday were Consumer Staples (XLP), Consumer Discretionary (XLY) and Utilities (XLU). The XLP and the XLY were the only two sectors down on the day.
The DXY rallied 0.4% on Friday and the Hedgeye Risk Management models have the following levels for the USD – Buy Trade (86.32) and Sell Trade (88.21). The VIX declined 5.8% on Friday and 18.6% last week. The Hedgeye Risk Management models have the following levels for the VIX – Buy Trade (27.11) and Sell Trade (36.41). On Friday, Treasuries gained modestly with the long-end outperforming.
In early trading, the EURO is trading higher by 1.1%. The Hedgeye Risk Management models have the following levels for the EURO – Buy Trade (1.18) and Sell Trade (1.23).
A notable standout on Friday was Healthcare (XLV). The (XLV) was up 0.8%, led by strength in Biotech with the BTK +1.8% and Pharmaceuticals (IHE) up 1.4%. The second best performing sector on Friday was Technology (XLK). The S&P software index was up 2.2% on the day and the SOX improved by 1.4%. National Semiconductor’s earnings and upbeat guidance lifted its shares by +5.0%; May quarter revenues, earnings and gross margins all beat consensus estimates. Coupled with TXN’s (0.3%) bullish outlook earlier this week, investors are beginning to get a clearer picture of how the second half could take shape in Semis.
In early trading, crude oil is trading above $75 on speculation of continued growth in the U.S. economy. The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (73.73) and Sell Trade (76.40).
In early trading, Copper is trading higher for the fifth straight day. The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (2.89) and Sell Trade (3.05).
The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,214) and Sell Trade (1,245).
As we look at today’s set up for the S&P 500, the range is 22 points or 0.9% (1,082) downside and 1.1% (1,104) upside. Equity futures are trading above fair value and close to session highs in a continuation of Friday's late rally and ahead of a busier week for economic releases which include May's CPI reading on Thursday.