Weekly Market Updates

Weekly Market Update, January 16, 2018

Presented by Kris Maksimovich

General market news

  • The yield on the 10-year Treasury opened at 2.55 percent on Monday morning, up from 2.40 percent, where it started the year, but below its recent high of 2.59 percent. As actions by the Federal Reserve (Fed) continue to affect the short end of the yield curve, the longer end has stayed quite stable. The 30-year remains well below 3 percent at 2.83 percent, while the 2-year is now above 2 percent.
  • S. markets continued their strong start to 2018. On the back of synchronized global growth and positive investor sentiment, all three major U.S. indices posted gains greater than 1.6 percent. Strong December retail sales and a hawkish tone from the European Central Bank minutes, both released last week, supported the global growth theme that has played out through the start of the year. Strong holiday sales favored stocks such as Target Corporation (TGT) and Kohl’s Corporation (KSS). The top-performing sectors for the week included industrials, energy, and consumer discretionary. Meanwhile, the bond proxies—the REIT, telecom, and utilities sectors—lagged.
  • Last week also kicked off earnings season. A number of large financial companies reported, including JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC), BlackRock, Inc. (BLK), and PNC Financial Services (PNC). All beat their earnings estimates, but Wells Fargo’s legal expenses from the prior year continued to weigh on revenues.
  • Last week was relatively quiet in terms of economic news, with only three major data releases. On Thursday, the Producer Price Index came in below expectations, showing 2.3-percent growth on an annualized basis. This measure of producer inflation also declined on a month-over-month basis.
  • On Friday, the Consumer Price Index beat expectations by growing at a 1.8-percent annual rate. Both of these measures of inflation remain near the Fed’s stated 2-percent target.
  • Also on Friday, December retail sales remained strong, with 0.4-percent growth on a month-over-month basis. Given the strength of this figure, overall fourth-quarter growth may have been faster than previously expected.
Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 1.61% 4.28% 4.28% 25.19%
Nasdaq Composite 1.75% 5.21% 5.21% 32.32%
DJIA 2.02% 4.44% 4.44% 32.85%
MSCI EAFE 1.20% 3.68% 3.68% 27.33%
MSCI Emerging Markets 0.61% 4.32% 4.32% 38.18%
Russell 2000 2.06% 3.70% 3.70% 18.52%

Source: Bloomberg

 

Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.50% –0.50% 2.64%
U.S. Treasury –0.67% –0.67% 1.21%
U.S. Mortgages –0.38% –0.38% 2.00%
Municipal Bond –0.46% –0.46% 3.75%

Source: Morningstar Direct 

What to look forward to

This week’s economic news will offer a look across the economy.

The industrial production report will be released on Wednesday. It is expected to show that growth ticked up from 0.2 percent in December to 0.4 percent in January on increased drilling and oil production. Manufacturing growth also is expected to tick up, from 0.2 percent in December to 0.3 percent in January, on strong global demand. There may be some downside risk in these estimates, after strong growth in recent months. Even if there is a slowdown, however, the overall trend remains positive.

Turning to housing, the National Association of Home Builders survey of homebuilder confidence also will be released on Wednesday. It is expected to drop slightly, from 74 in November—which was close to a 19-year high—to a still-strong 72, as demand for housing remains solid and prices continue to rise. Housing starts, released on Thursday, are expected to drop back to 1.27 million in December from 1.297 million in November. This slight pullback would signal that the industry remains healthy, despite shortages of labor, land, and materials.

Finally, on Friday, the University of Michigan consumer confidence survey is expected to rebound from 95.9 in December to 97.0 in January. The record stock market and strong job growth are expected to drive confidence higher. Historically, this level of confidence has indicated continued growth.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.

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Kris Maksimovich is a financial advisor located at Global Wealth Advisors 18170 Dallas Parkway, Suite 103, Dallas, TX 75287. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (972) 931-3818 or at info@gwadvisors.net.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2018 Commonwealth Financial Network®

 

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Weekly Market Update January 8, 2018

Presented by Kris Maksimovich 

General market news

  • Early Monday morning, the yield on the 2-year Treasury opened just below 2 percent at 1.95 percent, while the longer end of the curve essentially stayed flat, making the entire curve flatter. After an initial spike in the yield curve, the spread between the 2-year and 10-year has dropped to about 51 basis points, its lowest since October 2007. The 10-year opened at 2.47 percent, and the 30-year opened at 2.79 percent.
  • S. markets fared well during the first week of trading in 2018. All three major indices were up more than 2 percent. The Nasdaq Composite led the way, rising 3.4 percent on strength in semiconductors and FANG (Facebook, Amazon, Netflix, Google) stocks. This came despite news of two major flaws in computer chips—dubbed Meltdown and Spectre—which are expected to affect billions of devices. The S&P 500 followed with a 2.63-percent gain. The Dow Jones Industrial Average cracked the 25,000 mark for the first time and posted a 2.37-percent gain.
  • One sector that performed well was energy, as WTI crude saw a 1.7-percent increase following civil unrest in Iran and a drop in inventory.
  • Last week saw a number of important economic data points, covering the breadth of the economy. On Wednesday, the Institute for Supply Management (ISM) Manufacturing index surprised by increasing, despite expectations for a slight decline. This measure of manufacturing confidence is near a 13-year high.
  • On Friday, the December employment report came in worse than expected, with 148,000 new jobs added against expectations for nearly 200,000. On the bright side, wage growth remained stable, and the unemployment rate did not change.
  • Also on Friday, the ISM Nonmanufacturing index disappointed by declining for the second month in a row. Despite this pullback, this measure of service-side confidence remains in expansionary territory.
Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 2.63% 2.63% 2.63% 23.33%
Nasdaq Composite 3.40% 3.40% 3.40% 31.55%
DJIA 2.37% 2.37% 2.37% 30.19%
MSCI EAFE 2.45% 2.45% 2.45% 25.93%
MSCI Emerging Markets 3.68% 3.68% 3.68% 39.41%
Russell 2000 1.61% 1.61% 1.61% 15.20%

Source: Bloomberg

 

Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.32% –0.32% 3.03%
U.S. Treasury –0.39% –0.39% 1.73%
U.S. Mortgages –0.17% –0.17% 2.31%
Municipal Bond –0.03% –0.03% 4.89%

Source: Morningstar Direct 

What to look forward to

There will be two major data releases to pay attention to this week, both on Friday.

The first data release will be the Consumer Price Index. The headline series, which includes both food and energy, is expected to decline from 0.4 percent in November to 0.2 percent in December, driven largely by declining gasoline prices. The annual figure is expected to decline from 2.2 percent to 2.1 percent. The core inflation number, on the other hand, which excludes food and energy, is expected to rise on a monthly basis from 0.1 percent in November to 0.2 percent in December, which would leave the annual figure at 1.7 percent. If these numbers come in as expected, they would remain consistent with past performance, and there would be no significant market impact.

The second data release will be retail sales. The headline number, including auto sales, is expected to drop from 0.8 percent in November to a still-robust 0.4 percent for December, driven by a decline in auto sales. Core retail sales, which exclude auto sales, are also expected to decline, from 1 percent in November to a still-strong 0.4 percent in December. There may be some downside risk to this figure. Overall, if the numbers come in as expected, they would indicate continued strong consumer demand growth in the fourth quarter. 

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.

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Kris Maksimovich is a financial advisor located at Global Wealth Advisors 18170 Dallas Parkway, Suite 103, Dallas, TX 75287. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (972) 931-3818 or at info@gwadvisors.net.

Authored by the Investment Research team at Commonwealth Financial Network

© 2018 Commonwealth Financial Network®

 

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Weekly Market Update January 2, 2018

Presented by Kris Maksimovich                       

General market news

  • Early Monday morning, the yield on the 10-year Treasury opened at 2.41 percent and the 30-year opened at 2.79 percent. The yield curve started 2018 significantly flatter than it did one year ago. The spread between the 3-month and 30-year Treasury rates fell from 2.52 percent to 1.46 percent over the course of 2017.
  • In last week’s holiday-shortened week, U.S. markets finished modestly lower in lighter trading. The Nasdaq Composite posted the largest decline with a loss of 0.79 percent, as lower-than-expected iPhone sales weighed on Apple and the technology-focused index. The news also affected the S&P 500, as it posted a loss of 0.33 percent and was range-bound for much of the week. The Dow Jones posted the top performance of the three major U.S. indices, but it still declined 0.14 percent.
  • On a sector basis, real estate, utilities, and industrials were among the top performers on the week, while telecom, financials, and technology were the notable detractors.
  • International markets finished their year of strong performance last week with the MSCI EAFE Index up 0.95 percent and the MSCI Emerging Markets Index up 1.56 percent.
  • There was only one major data point released last week. On Wednesday, the Consumer Confidence Survey surprised by declining by more than expected. This confidence measure was expected to decline to 128 points but fell to 122.1 points. The drop was largely due to differing opinions between Republicans and Democrats regarding their expectations for the economy in 2018.
Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 –0.33% 1.10% 21.82% 21.82%
Nasdaq Composite –0.79% 0.50% 29.73% 29.73%
DJIA –0.14% 1.92% 28.11% 28.11%
MSCI EAFE 0.95% 1.63% 25.69% 25.69%
MSCI Emerging Markets 1.56% 3.49% 37.51% 37.51%
Russell 2000 –0.42% –0.41% 14.63% 14.63%

Source: Bloomberg

 

Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market 0.46 3.54 3.09
U.S. Treasury 0.31 2.31 1.67
U.S. Mortgages 0.33 2.47 2.07
Municipal Bond 1.05 5.45 2.81

Source: Morningstar Direct 

What to look forward to

The week ahead will be very busy for data releases and will give us a wide-ranging look at the economy.

On Wednesday, the Institute for Supply Management (ISM) will release its Manufacturing survey, which is expected to tick down slightly from 58.2 to 58.0. This is a diffusion index where values above 50 signal expansion. So, even with the expected minor pullback, this would still be a very positive signal, indicating continued manufacturing strength driven by a weak dollar and strong global growth.

Also on Wednesday, the minutes from the Federal Open Market Committee (the Fed) meeting on December 13 will be released. Markets will be watching closely to see what they can learn about the recent tax reform legislation and what it might mean for interest rates in 2018. Markets will also watch how the Fed is looking at inflation, which continues to run below expectations.

On Friday, three reports will be released. First up—and most important—is the employment report. It’s expected to tick down from 228,000 in November, which included a rebound from the hurricanes, to a more normalized 185,000, which would remain robust. This should take the unemployment rate down from 4.1 percent to 4 percent, while average hours worked should remain at a healthy 34.5 hours per week. Wage growth is expected to accelerate a bit, from 0.2 percent to 0.3 percent. If the numbers come in as expected, this would be a very positive data point indicating continued growth.

Next up will be the U.S. international trade gap report, where the trade deficit is expected to improve slightly from $48.7 billion to $47.4 billion. This would still indicate that trade was a drag on growth in the fourth quarter, however, and the risk appears to be to the downside.

Finally, the ISM’s Nonmanufacturing index is expected to tick down from 57.4 in November to 57.3 for December. Similar to the ISM Manufacturing survey, this small decline would keep business confidence at high levels, and it would be a signal of continued expansion.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.

###

Kris Maksimovich is a financial advisor located at Global Wealth Advisors 18170 Dallas Parkway, Suite 103, Dallas, TX 75287. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (972) 931-3818 or at info@gwadvisors.net.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2018 Commonwealth Financial Network®

 

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