Archive for ND&S Updates
Weekly Commentary (11/20/17) – Thanksgving …
November 20, 2017
A strange thing happened last week – the markets finished mostly lower. Yes, it does happen.
For the week, the DJIA dropped 0.19 while the S&P 500 finished lower by just 0.06% after being down last week as well (marking the first time since May that the S&P 500 finished lower two weeks in a row). Developed international markets also dropped as the MSCI EAFE index closed down 0.59% for the week. Emerging markets bucked the trend last week as the MSCI EM index finished higher by 0.72%. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week up 0.24%. As a result, the 10 YR US Treasury closed at a yield of 2.35% (down 5 bp from the previous week’s closing yield of 2.40%). Gold advanced $23.40 to close at $1,295.80/oz. Oil prices were essentially flat (down 19 cents) as they closed the week at $56.55/bbl. Recent events in Saudi Arabia have had little impact on prices as the real driver of higher prices lately points to a normalization of global inventories (ongoing production cuts) and reasonably steady demand.
Economic news released last week reinforced investors’ beliefs that the economy is solid. The Bureau of Labor Statistics (BLS) announced that October’s PPI advanced 0.4%, ahead of expectations of a 0.1% increase. Additionally, the BLS reported that the October CPI rose 0.1%, in-line with expectations. On Thursday, the Fed reported that industrial production rose a healthy 0.9% in October, nicely ahead of expectations for a 0.5% jump. Weekly jobless claims for the week ending November 11 failed to meet expectations, but jobless claims continued to be impacted by the slow recovery in Puerto Rico. Lastly, Friday saw that the Census Bureau report that October housing starts surged 13.7% (after three consecutive months of declines).
The holiday-shortened week ahead will see more economic releases – Leading Indicators, Existing Home Sales, Chicago Fed Activity Index, Weekly Jobless Claims, Univeristy of Michigan Sentiment, Durable Goods Orders, the Markit US Manufacturing PMI and the release of the FOMC November meeting minutes.
As always, we plan to look through the day-to-day news and focus on longer-term objectives. Investors should stay the course and stick close to their long-term asset allocation targets. But most importantly, let’s give thanks for the many blessings in our lives.
Best wishes for a Happy Thanksgiving!
“Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.” – Oprah Winfrey
Weekly Gains Come to End
November 13, 2017
Last week all three major U.S. equity indexes had declines with the DJIA, S&P 500 and NASDAQ falling 0.35%, 0.14% and 0.14% respectively. Investors’ concerns about the status of a U.S. tax overhaul pressured stock prices as a Senate version of the tax cut program indicated that the corporate tax cuts would not take effect until 2019. This raises concerns over earnings projections for 2018 and pressures GOP leadership further as they have failed to enact any major initiatives despite controlling majorities in both chambers. The best performing sectors last week were real estate and consumer staples.
Results for international equities were mixed as the EAFE index declined -0.40% while emerging markets rose by 0.22%.
U.S. interest rates also rose last week as a potential December rate hike by the FOMC gained attention. The 10 year U.S. Treasury rate rose to 2.40% from 2.34% the previous week.
This week look for economic reports on retail sales, industrial production and inflation readings from reports on CPI and PPI. In addition, earnings season is winding down with reports expected from HD, TGT, and CSCO to name a few.
On this Veterans Day, we thank all those who have honorably served our great nation. We are especially grateful for all those service members who never returned home as we are reminded of the inscription on the Tomb of the Unknown Soldier – “Here rests in honored glory an American soldier known but to God”
Trick or Treat
November 6, 2017
The stock market remained strong last week, as corporate earnings (EPS) growth continues to exceed analysts’ expectations. With over 81% of the S&P 500 companies having reported, average EPS is expected to surge 8.0% with revenues up 5.2%.
Last week, the DJIA and the S&P 500 rose 0.45% and 0.23% respectively. With regards to quarterly earnings, several large tech companies flexed their muscles reporting solid numbers. The tech sector finished the week up 1.8%. Another winner was the energy sector returning 1.7%, benefitting from the 3.3% increase in crude oil prices. The tech-heavy NASDAQ climbed 1.09% while small companies declined with the Russell 2000 finishing down 0.06% for the week. The international equity markets felt the effect of the increasing dollar. Developed equities (MSCI EAFE) declined 0.34% and emerging markets stocks (MSCI EM) lost 0.84%.
US Treasuries moved higher after the recent jobs report indicated a decline in average wages and less-than-expected job gains. Inflation is also below the Fed’s 2% target. The 10year Treasury yield settled at 2.34%, down from the previous week’s 2.43%.
Trump picked Jerome “Jay” Powell to replace Janet Yellen as Fed Chair at the end of her term which ends on February 3rd. Powell is seen as an experienced conservative and is not expected to change current Fed Policy. The Fed’s meeting left interest rates unchanged, citing rising economic activity despite the hurricane and fire devastations. Next month, the Fed is expected to increase short-term interest rates with three increases likely in 2018.
The House’s tax reform bill was released on Thursday and it provides sweeping changes. Corporate tax rates would be lowered from 38% to 20% while several deductions would be reduced or eliminated. We expect some additional changes as the bill moves through Congress.
We once again favor diversified portfolios among asset classes with lower duration fixed income holdings and look towards international equities to maintain outperformance.
“My sorrow, when she’s here with me, thinks these dark days of autumn rain are beautiful as days can be; she loves the bare, the withered tree; she walks the sodden pasture lane.” – Robert Frost
Post-Thanksgiving Market Recap
November 27, 2017
We hope everyone had a happy Thanksgiving! Global equities were modestly higher during the holiday-shortened week.
For the week, the DJIA closed higher by 0.89% while the broader-based S&P 500 moved up 0.93% to close above 2600 for the first time. Small Cap US equities were higher as well with the Russell 2000 up 1.77%. International equities also continued their advance with both the MSCI EAFE and MSCI EM finishing higher by 1.88% and 1.57% respectively. International equities were helped last week from better-than-expected November PMIs for the Eurozone with both the manufacturing & services sectors posting their highest readings since 2011. Treasury yields closed slightly lower for the week with the 10yr Treasury closing a yield of 2.34%, down from 2.35% the week prior. Oil (WTI) finished the week at its highest level in over two years closing the week at $58.97/barrel.
Economic news released last week included: existing home sales rose 2% in October to an annual rate of 5.48M, beating expectations; manufactured durable goods came in below expectations as it fell 1.2% in October; jobless claims for the week ending November 18 came in at 239k. Jobless claims have remained below 300k for 142 consecutive weeks, the longest streak since 1970 underscoring the strength of the US labor market.
Earnings season is nearly complete and has been mostly positive with over 70% of companies reporting positive EPS surprises. Earnings growth for the broader market has increased roughly 7.5% y/y with revenues up 5.5%. Technology, financials, and consumer staples surprised positively while utilities and telecom posted weaker results.
In the week ahead, look for reports on home sales, 3Q17 GDP, Personal Income and PCE, and ISM & Markit PMIs. Let’s make it a good week!
“In three words I can sum up everything I’ve learned about life: it goes on.” – Robert Frost