Hodgepodge of Headlines Helps Fuel Rebound

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The S&P 500 advanced 0.6% this week -- recouping last week’s modest decline -- amid a host of retail earnings, more volatility in the Turkish lira, and another (minor) chapter in the U.S.-China trade war saga. The blue-chip Dow outperformed the S&P 500, rallying 1.4%, but the tech-heavy Nasdaq lagged, losing 0.3%.

Retailers stepped up to the earnings plate this week, with Walmart (WMT), Home Depot (HD), Macy’s (M), Nordstrom (JWN), Advance Auto (AAP), and J.C. Penney (JCP) all reporting their quarterly results. The market’s reaction to the reports was mixed.In the session immediately following their respective earnings releases, Walmart spiked 9.3%, Home Depot lost
0.5%, Macy’s plunged 16.0%, Nordstrom spiked 13.2%, Advance Auto climbed 7.8%, and J.C. Penney plunged 27.0%. On a related note, the July Retail Sales report came in better-than-expected, showing a month-over-month increase of 0.5% (Briefing.com consensus +0.1%).

Non-retail names reporting earnings this week included Cisco Systems (CSCO), NVIDIA (NVDA), and Deere (DE). Cisco Systems and Deere rallied in the session immediately following their releases, adding 3.0% and2.4%, respectively, but market-darling NVIDIA tumbled, losing 4.6%, after disappointing guidance overshadowed up beat results.

In other corporate news, Tesla’s (TSLA) chief executive, Elon Musk, attempted to clarify last week’s tweet about taking Tesla private, saying that his claim that funding has been secured is based on repeated conversations with Saudi Arabia’s sovereign wealth fund. Mr. Musk also
did a high-profile interview with The New York Times, in which he discussed his personal struggles, calling this past year “the most difficult and painful” of his career.
Tesla shares ended the week lower by 14.1%.

In currencies, the Turkish lira followed up last Friday’s 16% plunge with another slide on Monday, touching a new all-time low against the U.S. dollar, but then rebounded for the next three sessions. That streak ended with another tumble on Friday, but the currency still finished with a weekly gain of 6.1%. On the trade front, reports that the U.S. and China will resume trade talks by the end of the month helped equities rally on Thursday. The talks will mark the first official negotiations since a breakdown two months ago, but it’s worth noting that the talks are expected to be between low-level officials. In addition, The Wall Street Journal reported late on Friday that Chinese and U.S. negotiators are planning talks to try to end their trade disagreement ahead of multilateral meetings between President Trump and President Xi in November.

Elsewhere, West Texas Intermediate crude futures tumbled 2.5% to $65.94 per barrel this week, touching a fresh two-month low on Wednesday after the Energy Information Administration’s weekly inventory report showed an unexpected build of 6.8 million barrels. The drop in oil prices weighed on the energy group, which finished at the bottom of the sector standings with a loss of 3.6%.


Most S&P 500 sectors finished the week in positive territory, with less-risky, countercyclical groups -- including consumer staples (+3.2%), utilities (+2.5%), and telecom services (+3.7%) -- leading the charge. The top-weighted technology sector underperformed, shedding 0.2%, but remains 2018’s top-performing group with a year-to-date gain of 15.6%.

Market Recap - Rattled by the Lira

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The S&P 500 started the week on a positive note, extending last week's winning streak and coming within 0.5% of its January 26 record high. However, the index struggled in the back half of the week, especially on Friday amid a sharp drop in the Turkish lira, eventually settling with a weekly loss of 0.3% -- its first weekly loss since late June.

As for the other major averages, their performances were mixed, with the tech-heavy Nasdaq climbing 0.4% and the blue-chip Dow dropping 0.6%.

Eight of eleven S&P sectors declined this week, with industrials (-1.0%), materials (-0.9%), consumer staples (-1.9%), and real estate (-1.9%) leading the retreat. On the flip side, consumer discretionary (+0.8%), information technology (+0.3%), and telecom services (+0.7%) were the three advancing groups.

In corporate news, Tesla (TSLA) rallied on Tuesday after CEO Elon Musk tweeted that he's considering taking the company private for $420/share and has already secured funding to do so. However, shares gave back nearly all of those gains following headlines that the SEC is investigating whether Mr. Musk's funding claim is truthful.

Meanwhile, on the earnings front, Dow component Walt Disney (DIS) slid 2.2% on Wednesday after missing quarterly earnings estimates, and Snap (SNAP) tumbled 6.8% during the same session after its better-than-expected results were overshadowed by a decline in daily active users (DAUs). This week's wave of Q2 reports was the last big wave of the Q2 earnings season.

The week was light in terms of economic data, but investors did receive some influential readings on inflation. The July Consumer Price Index and the July core Consumer Price Index, which excludes the volatile categories of food and energy, came in as expected, both showing month-over-month increases of 0.2%. On a year-over-year basis, total CPI is up 2.9% and core CPI is up 2.4%.

In short, the report showed that consumer inflation trends are running above the Fed's longer-run target, providing further support for additional rate hikes this year.

The Turkish lira took center stage on Friday, dropping more than 15% against the U.S. dollar. That drop, which comes after the U.S. and Turkey failed to reach an agreement regarding the release of American pastor Andrew Brunson, created concerns over the financial health of banks with heavy exposure to economically-struggling Turkey.

Out of desperation to stabilize the currency, Turkey's president, Recep Tayyip Erdogan, asked citizens to convert their holdings of gold and foreign currencies, especially the U.S. dollar, into lira. U.S. President Donald Trump responded by increasing economic pressure, doubling tariffs on steel and aluminum imports from Turkey.

Market Recap - Apple Becomes First $1 Trillion Company

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Apple Becomes First $1 Trillion Company

Stocks climbed this week as investors digested the Fed’s latest policy directive and Apple’s (AAPL)quarterly earnings report, which helped boost the company’s market cap above the unprecedented $1trillion mark. The S&P 500 advanced 0.8%, and the tech-heavy Nasdaq rose 1.0%. The Dow lagged though, adding just 0.1%.

The Fed left interest rates unchanged as expected on Wednesday, keeping its target range at 1.75% to 2.00%, and characterized the economy as strong, signaling that the central bank is still on track to raise rates two more times this year. The next rate hike will likely come in September, with the CME FedWatch Tool placing the chances at 93.6%.

Overseas, the Bank of Japan and the Bank of England also held policy meetings this week. The BoJ decided to leave its ultra-loose monetary policy intact, but the BoE voted to raise rates for just the second time in a decade and surprised some by saying it anticipates raising rates further despite the looming uncertainty over Brexit.  

In Washington, President Trump ordered his top trade representative to consider increasing proposed tariffs on $200 billion worth of Chinese goods to 25% from 10%.  Beijing threatened to retaliate with tariffs on about $60 billion worth of American goods. The news didn’t have much impact on U.S. markets, but China’s Shanghai Composite lost 4.6% for the week, retesting a nearly two-and-a-half year low. 

On the earnings front, Apple gobbled up all the attention after releasing its fiscal Q3 results on Tuesday evening.   The world’s largest tech company beat earnings and revenue estimates and issued positive guidance for Q4, helping to restore faith in FAANG names after a disappointing report from Facebook (FB) last week. 

In response, Apple shares rallied 5.9% on Wednesday and then another 2.9% on Thursday, making Apple the first ever company with a market cap of $1 trillion. 

Tesla (TSLA) shares also soared, spiking 16.2% on Thursday, after above-consensus revenues, reaffirmed guidance, and an apology from CEO Elon Musk for last quarter’s abrasive earnings call helped the electric automaker overcome a larger-than-expected earnings per share loss of $3.06.

As for economic data, the July Employment Situation report was released on Friday, showing a below-consensus increase in nonfarm payrolls (157K actual vs 190K Briefing.com consensus). However, the June increase was upwardly revised to 248K from 213K, helping to offset the disappointing headline figure. Average hourly earnings increased 0.3%, as expected, and the unemployment rate ticked down to 3.9%.

The key takeaway from the report is, when accounting for the revisions and the fact that the year-over-year increase in average hourly earnings held steady at 2.7%, it’s essentially the same ‘Goldilocks’ report that the market cheered last month.

Market Recap - Investors Shrug Off Headline-Heavy Week

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There was a heap of headlines out of Washington this week, but Wall Street kept its cool, finishing little changed. The S&P 500 finished flat, while the Dow Jones Industrial Average finished a tick higher (+0.2%), and the Nasdaq Composite finished a tick lower (-0.1%). The small-cap Russell 2000 outperformed, rallying 0.6%.

President Trump capped a week-long trip to Europe on Monday by meeting with Russian president Vladimir Putin in Helsinki, Finland. The leaders met for roughly four hours, discussing a wide range of topics, including arms control, the future of Syria, and, of course, Russian interference in the 2016 U.S. election, which Mr. Putin again denied.

Mr. Trump faced criticism for appearing to reject his own intelligence agencies' conclusion that Russia meddled in the election in favor of Mr. Putin's plea of innocence. President Trump later clarified his remarks, replacing the word would with wouldn't in the following statement referring to Russian interference: "I don't see any reason why it would be [Russia]."

On to U.S.-China trade relations, NEC Director Larry Kudlow said on Wednesday that he believes some lower-ranking Chinese officials would like to reach a trade deal, but Chinese President Xi is refusing to compromise. China's foreign ministry responded to Mr. Kudlow's comment, calling it "shocking" and "bogus."

Back to Mr. Trump, the president did an exclusive interview with CNBCon Thursday in which he criticized the Fed, saying he's "not thrilled" about interest rate hikes, and said he is willing to slap tariffs on $500 billion worth of Chinese goods -- virtually every Chinese product coming into the U.S. -- if necessary. Mr. Trump also commented on the strengthening dollar, saying it puts the U.S. at a disadvantage.

The president followed up that interview with a tweet on Friday, saying "China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge...Tightening now hurts all that we have done."

Mr. Trump's comments on the Fed were particularly controversial as presidents typically refrain from speaking on monetary policy in an effort to protect the Fed's independence. The White House issued a follow-up statement after the CNBC clip aired on Thursday, clarifying that Mr. Trump respects the Fed's independence.

On a separate -- but related -- note, Fed Chair Jerome Powell gave Congress his semiannual update on the economy and monetary policy, speaking before both the Senate Banking Committee and the House Financial Services Committee. Mr. Powell's testimony provided no new information; he simply reinforced the view that improving economic conditions should allow the Fed to continue hiking rates gradually.

Whew. With all of that in mind, let's turn away from Washington and towards this week's trading on Wall Street.

The second quarter earnings season heated up this week with several influential names reporting their latest results. Netflix (NFLX) dropped sharply on Tuesday -- although shares did rebound notably intraday -- after the streaming media company missed subscriber growth estimates. Ahead of earnings, Netflix was up more than 100% on the year.

Fellow tech names Microsoft (MSFT), IBM (IBM), and eBay (EBAY) also reported their quarterly results this week. Microsoft and IBM rallied after beating earnings estimates, but eBay tumbled after reporting below-consensus results. The top-weighted technology sector finished the week with a gain of 0.1%, extending its yearly advance to 15.4%.

Several financial giants also reported earnings this week, includingBank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS), all of which topped estimates. The positive results helped the heavily-weighted financial sector climb 2.2% and finish atop the week's sector standings.

In other corporate news, Comcast (CMSA) said it will not counterDisney's (DIS) offer for 21st Century Fox's (FOXA) entertainment assets, and Amazon (AMZN) held its annual Prime Day, saying the 36-hour special was its biggest shopping event ever -- even despite having to deal with some technical glitches.

Energy was the worst-performing sector this week, losing 1.9%, as crude oil extended last week's tumble; WTI crude futures dropped 3.9% to $68.23/bbl and are now 8.0% below the nearly three-and-a-half year high they've touched several times this month. Fears that the U.S. may give some countries waivers to continue buying oil from Iran was one of several factors weighing on the commodity.

Market Recap - Fireworks For The Bulls

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It was an abbreviated week of trading due to the Fourth of July holiday, yet there were plenty of fireworks for the bulls who enjoyed a winning week for the major indices.

The bullish bias was remarkable in that concerns about protectionist trade measures were discussed throughout the week.  Those concerns did not derail the stock market, yet they did not go unnoticed.

Some of this week's best-performing sectors were the defensive-oriented health care (+3.1%), utilities (+2.4%), and telecom services (+2.2%) sectors. Meanwhile, the yield on the benchmark 10-yr note dropped three basis points to 2.82%, which gave a lift to the real estate sector (+1.8%).

By and large, though, it was a risk-on week in the stock market, which moved up on the back of gains in every sector but the energy sector (-0.3%).

The latter moved in tandem with oil prices, which dropped 0.5% to $73.77/bbl, pressured by a bearish inventory report from the Department of Energy and assumptions that Saudi Arabia will tap into its spare capacity to maintain stability in the oil market.

The information technology sector (+2.3%), supported by the usual mega-cap suspects, was a standout yet again, bringing its year-to-date gain to 12.7%.  Facebook (FB) for its part increased 4.6% for the week, with the entirety of its gain coming over the last two trading sessions.

Those last two trading sessions were governed by insouciant trading behavior, as the major indices advanced resolutely in the face of the FOMC Minutes highlighting how business contacts in some districts were scaling back, or postponing, capital spending plans as a result of the uncertainty over trade policy and the U.S. and China pressing ahead with the implementation of tariffs on $34 billion worth of imported goods from each other.

There was no uncertainty on Friday following the release of the June employment report.  Market participants seemingly rejoiced in the understanding that the report once again had a Goldilocks hue to it, featuring solid nonfarm payrolls growth (+213,000) and a subdued 2.7% year-over-year gain in average hourly earnings that kept inflation worries, and aggressive rate-hike worries, at bay.

That economic report overshadowed the gloomy trade developments, which also included a contention by President Trump that the U.S. could possibly levy tariffs on more than $500 billion of Chinese goods if necessary.   The stock market made note of the remark, yet it was not unnerved by it.

The US. Dollar Index settled the week 0.7% lower at 94.01 while the CBOE Volatility Index plunged 16.9% to 13.37, underscoring a lack of hedging interest to protect for near-term downside risk.  The entirety of the decline in the CBOE Volatility Index came over the last two trading days of the shortened week.

Not surprisingly, trading volume was on the light side this week as many participants took vacation.

  • Nasdaq Composite +11.4% YTD
  • Russell 2000 +10.3% YTD
  • S&P 500 +3.2% YTD
  • Dow Jones Industrial Average -1.1% YTD

Market Recap - Trade Tensions Strike Again

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U.S. equities declined for the second week in a row as investors continued to focus on U.S.-China trade tensions. The S&P 500 and the Dow Jones Industrial Average dropped 1.3% apiece, while the tech-heavy Nasdaq Composite slid 2.4%. Small caps were hit especially hard, sending the Russell 2000 lower by 2.5%.

Trade war fears weighed at the start of the week due to reports that the White House is looking to bar Chinese companies from investing in U.S. tech firms. The Trump administration first responded to the reports with a mixed message; Treasury Secretary Steven Mnuchin said the White House is targeting all countries, not just China, while President Trump's top trade adviser, Peter Navarro, said the administration doesn't have any plans to impose investment restrictions, regardless of country.

However, the administration eventually cleared things up, deciding to defer foreign investment regulation to the Committee on Foreign Investment in the United States (CFIUS). That decision was seen as a positive alternative to direct White House intervention and helped the equity market rebound in the second half of the week.

Separately, the U.S. State Department threatened to impose powerful sanctions on countries that don't cut oil imports from Iran to "zero" by November 4. That headline, paired with a larger-than-expected draw in U.S. crude inventories (9.9 million barrels), pushed crude prices back to a three-and-a-half year high. WTI crude futures added 8.1% for the week, closing at $74.12 per barrel.

Also out of Washington, Supreme Court Justice Anthony Kennedy announced his retirement, effective July 31. Although he identifies as a conservative, Mr. Kennedy has often sided with his liberal colleagues. His retirement gives President Trump the chance to strengthen the court's conservative majority.

In corporate news, Amazon (AMZN) made headlines after announcing a deal to acquire online pharmacy start-up PillPack. That news sent shares of drug distributors like CVS Health (CVS) and Walgreens Boots Alliance (WBA) solidly lower. Amazon also announced it is inviting entrepreneurs to form small companies to carry packages over the last leg of the delivery journey.

Elsewhere, General Electric (GE) announced plans to spin off its health care business and to sell its 62.5% stake in oil and gas company Baker Hughes (BHGE); Walt Disney (DIS) won DOJ approval to buy most of Fox's assets for $71.3 billion, subject to the condition that Disney sells 22 regional sports networks; and Nike (NKE) spiked to a new record on Friday after beating both top and bottom line estimates and announcing a new $15 billion share repurchase program.

As for this week's S&P sector standings, utilities (+2.3%), telecom services (+1.2%), real estate (+1.1%), and energy (+1.0%) were the top-performing groups, while the heavily-weighted technology (-2.2%), financials (-1.9%), consumer discretionary (-1.9%), and health care (-1.8%) sectors finished at the back of the pack.

Market Recap - Trade Tensions Weigh

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Stocks fell this week as trade tensions helped to keep buyers at bay. The benchmark S&P 500 index ended the week lower by 0.9%. The tech-heavy Nasdaq lost 0.7%, but did notch a new all-time high on Wednesday, and the Dow Jones Industrial Average tumbled 2.0%.

At the start of the week, investors were still weighing the prospect of a trade war between the U.S. and China after President Trump confirmed last Friday that he has approved a 25% tariff on $50 billion worth of Chinese goods. Beijing responded swiftly to that news, vowing to implement equivalent duties on U.S. goods.

The story added a new chapter on Monday evening when President Trump asked his administration to identify an additional $200 billion worth of Chinese goods that he says will be hit with a 10% tariff should China follow through on its promise to retaliate. In addition, if China retaliates against the new $200 billion list, Mr. Trump said he will place tariffs on yet another $200 billion worth of Chinese goods.

The industrial sector, which is viewed as being in the crosshairs of protectionist trade actions, was the worst-
performing S&P 500 group this week, losing 3.4%. Similarly, chipmakers, which derive a large chunk of
their revenue from shipments to China, were also under pressure, sending the Philadelphia Semiconductor Index lower by 3.6%.

President Trump issued another tariff threat on Friday, this time targeting the European Union. The president
said the U.S. will be imposing a 20% tariff on all automobiles imported from EU countries if the EU fails
to remove duties on imports of U.S. automobiles. On a related note, as of Friday, the European Union has
officially implemented tariffs on $3.2 billion worth of U.S. goods in retaliation to U.S. tariffs on imports of steel and aluminum that went into effect earlier this month.

Elsewhere, the Organization of Petroleum Exporting Countries (OPEC) met in Vienna this week to discuss
easing production caps that have been in place for more than 18 months. The meeting was reportedly contentious, but the countries eventually agreed to boost oil output by a less-than-expected 600,000 barrels per day. WTI crude futures rallied to a four-week high on Friday following the news, and the energy sector reclaimed losses registered earlier in the week, finishing with a weekly gain of 1.5%.

In U.S. corporate news, Walgreens Boots Alliance (WBA) will be joining the Dow Jones Industrial Average on June 26, taking the spot of General Electric (GE), which was one of the original Dow components and has been a continuous part of the average for more than a century. The decision follows a disastrous 18-month stretch for GE shares, which have dropped around 60% since the end of 2016.

Separately, media names returned to the spotlight on Wednesday when Walt Disney (DIS) increased its offer for 21st Century Fox’s (FOXA) entertainment assets. Disney is now offering $38 per share, up from its previous offer of $28 per share and better than last week’s offer from Comcast (CMCSA) of $35 per share.

E-commerce companies, including Amazon (AMZN), eBay (EBAY), Wayfair (W), Overstock.com (OSTK), and Etsy (ETSY), sold off on Thursday after the U.S. Supreme Court ruled that states can require online retailers to collect sales tax, overturning a 1992 precedent.

Also of note, Intel’s (INTC) chief executive, Brian Krzanich, resigned after breaking the company’s non-fraternization policy, Oracle (ORCL) shares dropped to a 15-month low after the company’s quarterly update provided less insight than usual into its growing cloud business, and Starbucks (SBUX) shares hit a three-year low after the company announced it will be scaling back store growth.

U.S. Treasuries ended the week on a modestly higher note, pushing the benchmark 10-yr yield lower by two basis points to 2.90%.

Market Recap - Little Changed Following Headline-Heavy Week

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There was a steady stream of noteworthy news this week, but none of the headlines moved the S&P 500 in a significant way. The benchmark index ended the week almost exactly flat, adding less than one point. The tech‐heavy Nasdaq outperformed, adding 1.3%, while the Dow lagged, losing 0.9%.

This week's story really began over the weekend when the annual Group of Seven meeting, which was held in Quebec, ended on an uncharacteristically contentious note. President Trump was prepared to sign the customary joint statement, but changed his mind following what the White House deemed as "inappropriate" comments from Canadian Prime Minister Justin Trudeau.

The world then turned its attention to Singapore, where President Trump met with North Korean leader Kim Jong Un on Tuesday in a historic summit that marked the first ever meeting between a sitting U.S. president and a North Korean leader. The meeting ended with a joint statement in which North Korea reaffirmed its commitment to completely denuclearize and the U.S. promised "security guarantees" ‐‐ including the suspension of military exercises on the Korean Peninsula. The two nations will engage in follow‐up negations to work out the specific details.

Monetary policy took center stage midweek when the U.S. Federal Reserve released its latest policy directive. The Fed decided to raise interest rates for the second time this year, increasing the fed funds target range by a quarter point to 1.75% to 2.00%, and upped its interest‐rate forecast to include a total of four rate increases this year ‐‐ up from three in March. The market had expected the rate hike, but the updated forecast took some by surprise.

Overseas, the European Central Bank released its latest policy directive on Thursday. As expected, the ECB left its key policy rate unchanged and announced a plan to end its asset purchase program. The ECB in September will cut its monthly purchases in half, from EUR30 billion to EUR15 billion, and then end purchases altogether three months later ‐‐ although it will continue to reinvest the principal from maturing securities. As for interest rates, the ECB said they will remain at their present levels "at least through the summer of 2019." That statement was credited with sending the euro down more than 1.0% against the U.S. dollar.

The Bank of Japan also conducted a policy meeting this week but made no changes to its key interest rate. However, the BoJ did downgrade its view on inflation, further highlighting the difference between the BoJ, which is struggling to end its crisis‐era stimulus, and the Fed, which continues to progress on a path to normalization.

Back in the States, media names were in focus after a federal judge on Tuesday ruled in favor of AT&T (T) in its drawn‐out legal battle with the Justice Department. The ruling allowed AT&T to move forward with its acquisition of Time Warner (TWX), which it closed on Thursday, and set the stage for more merger activity in the future. Comcast(CMCSA), for instance, outdid Disney's (DIS) all‐stock bid for the bulk of 21st Century Fox's (FOXA) assets following the ruling, offering $65 billion in cash.

In politics, trade war fears were reignited on Friday after President Trump confirmed that he's approved a 25% tariff on $50 billion worth of Chinese goods. China responded swiftly, announcing that it'll impose a 25% tariff on $34 billion worth of U.S. goods on July 6, the same day the U.S. tariffs are scheduled to take effect.

Market Recap - Third Straight Weekly Advance

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The U.S. equity market advanced for the third week in a row, with the benchmark S&P 500 index adding 1.6%. The Dow Jones Industrial Average was particularly strong, adding 2.8%, while the Nasdaq Composite and the Russell 2000 touched new record highs, finishing the week with respective gains of1.2% and 1.5%.

There were several notable corporate headlines this week, starting on Monday when the executive chairman and former CEO of Starbucks(SBUX), Howard Schultz, announced that he will be stepping down. In talking about his future plans, Mr. Schultz failed to rule out a run for the White House, prompting speculation that he'll challenge President Trump in 2020.

Elsewhere in the consumer discretionary space, Tesla (TSLA) shares spiked on Wednesday after CEO Elon Musk said it's "quite likely" that Tesla will hit its target for producing 5,000 Model 3 electric vehicles per week by the end of June. Retailers soared this week, sending theSPDR S&P Retail ETF (XRT) higher by 6.3%, following comments from Evercore ISI Research, which suggested that fears aboutAmazon's (AMZN) ever‐growing footprint may be overblown. Some short‐covering activity also likely helped push retail shares higher.

Meanwhile, in the tech space, Facebook (FB) came under scrutiny once again following news that the social media company has data‐sharing partnerships with at least four Chinese electronics companies, including one flagged as a national security threat by American intelligence officials. Separately, Apple (AAPL) shares dropped on Friday following reports that the company has asked its supply chain to prepare around 20% fewer components for iPhones debuting in the second half of 2018.

In Washington, Commerce Secretary Wilbur Ross said the U.S. has struck a deal to end crippling sanctions against Chinese telecom giant ZTE that includes a $1 billion penalty and the implementation of a U.S.‐chosen compliance team to monitor the company going forward. ZTE will also be required to change its board of directors and its executive team. On a related note, China is reportedly ready to approve Qualcomm's (QCOM) proposed acquisition of NXP Semi(NXPI).

Leaders from the Group of Seven (G7) kicked off their annual summit on Friday in the small Canadian resort town of La Malbaie. This year's meeting is expected to be more contentious than usual due to President Trump's decision to impose tariffs on imports of steel and aluminium. French President Emmanuel Macron has threatened to exclude the U.S. from the annual joint statement, symbolizing the strained relationship between the U.S. and its allies.

In Europe, the ECB's Chief Economist, Peter Praet, said the European Central Bank will discuss how to wind down its asset purchase program at next week's policy meeting after officials agreed that inflation is moving towards the central bank's target of 2.0%. The euro responded by rallying against the U.S. dollar, adding nearly 1.0% for the week.

The Fed will also be meeting next week, and it's all but certain that officials will hike interest rates for the second time this year. The question is whether the updated interest‐rate projections, which will be released alongside the rate‐hike decision on Wednesday, will call for one or two more hikes this year.

Market Recap - Roller-Coaster Week Ends On An Upswing

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The stock market finished the week on a mostly higher note as investors digested an easing of the political crisis in Italy, fresh tariff-related developments, and the Employment Situation report for May. The S&P 500 (+0.5%), the Nasdaq Composite (+1.6%), and the Russell 2000 (+1.3%) advanced, while the Dow Jones Industrial Average (-0.5%) finished a step lower.

U.S. markets opened the week on Tuesday following a three-day Memorial Day weekend. Sellers dominated that Tuesday session after Italian President Sergio Mattarella blocked the formation of a euro-skeptic government, vetoing the economic minister nominee of an anti-establishment coalition that was aiming to come to power. Italian bond yields surged in reaction as some feared the veto would prompt a snap election that could turn into a de facto referendum on Italy's membership in the European Union. The Italian political crisis calmed down on Thursday evening, when President Mattarella approved the formation of a ruling coalition between Italy's anti-establishment Five Star Movement and right-wing League party, effectively silencing the prospect of a snap election later this year.

Elsewhere in Europe, Spain endured some political drama of its own this week as Prime Minister Mariano Rajoy was ousted on Friday in a no-confidence vote following a corruption scandal involving 29 individuals with ties to his People's Party. Pedro Sanchez, the leader of the Socialist Party, will succeed Mr. Rajoy as prime minister. Separately, German financial giant Deutsche Bank hit a 16-month low on Thursday after The Wall Street Journal reported that it's on the Federal Reserve's list of troubled banks.

Back in the U.S., the stock market rebounded from its Tuesday slide on Wednesday with energy shares leading the charge following reports that OPEC and Russia will keep production cuts in place until at least the end of the year. West Texas Intermediate crude futures rallied on Wednesday in reaction, but still finished the week lower by 3.0%.

Stocks stumbled for a second time on Thursday when the Trump administration announced that it will let steel and aluminum tariff exemptions expire for the EU, Canada, and Mexico. The White House's decision, which elicited retaliatory responses from the EU, Canada, and Mexico as expected, will result in duties of 25% on steel imports and duties of 10% on imports of aluminum, effective June 1.

Wall Street bounced back on Friday, bolstered by an easing of the political tension in Europe, news that the June 12 summit with North Korea is back on, and the release of the Employment Situation report for May, which featured a better-than-expected increase in nonfarm payrolls (+223K actual vs +190K Briefing.com consensus) and a lower-than-expected unemployment rate (3.8% actual vs 3.9% Briefing.com consensus). The average hourly earnings figure came in as expected, showing a month-over-month increase of 0.3%.

The key takeaway from the employment report is that it still had a Goldilocks hue to it, having been accented with strong job growth and only moderate wage inflation. Furthermore, the strong job growth and low unemployment rate created some good feelings about the potential for a pickup in consumer spending that should aid the second quarter growth outlook.

Six of eleven S&P sectors declined this week, with financials (-1.3%), telecom services (-0.9%), and industrials (-0.7%) being the weakest performers. Conversely, energy (+2.5%), technology (+2.0%), and real estate (+1.7%) were the top-performing groups.

Retailers dominated the earnings front once again, with Costco(COST), Dollar General (DG), Dollar Tree (DLTR), lululemon(LULU), Ulta Beauty (ULTA), Dick's Sporting Goods (DKS), and others reporting their quarterly results, which came in mixed. TheSPDR S&P Retail ETF (XRT) settled roughly flat for the week.

U.S. Treasuries were volatile this week, eventually finishing with modest gains. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, finished the week lower by three basis points at 2.90%. Meanwhile, the U.S. Dollar Index eked out a fractional gain, settling the week at 94.22.