Markets Cautious but Resilient – Weekly Update for August 21, 2017

August 21, 2017 By Leave a Comment

From domestic unrest to international terrorism, last week provided many headlines that could easily rattle the markets. While we did see days with volatility and declines, the major indexes remained relatively flat. For the week, the Dow was down 0.84%, the S&P 500 dropped 0.65%, and the NASDAQ fell 0.64%. On the international front, the MSCI EAFE remained virtually the same last week as the week before, recording a microscopic 0.0014% increase.

Why didn’t the markets react to the geopolitical turmoil by turning sharply negative? As we’ve shared before: Headlines shouldn’t drive long-term market behavior—economic fundamentals should. Last week, we received reports indicating the economy continues to be strong in a number of areas.

Here is a closer look at last week’s important economic news:

  • Robust Retail Sales: July retail sales rose 0.6%, beating expectations and showing strength in a variety of retail categories.
  • Strong Business Inventories: Factory, warehouse, and retail business inventories all jumped for a combined 0.5% increase in June. The data looks promising—inventory levels tend to rise in positive economic environments.
  • Uneven Industrial Activity: Industrial production rose 0.2% in July. This growth was lower than expected due to declining motor vehicle production dragging on the index.
  • Mixed Housing Data: The housing market index surged by 4 points as home-builders experience an increasing demand from buyers. But despite the growing appetite for new construction, July’s housing starts slipped, in part because builders are struggling to find experienced labor and new sites to build on.

Looking Ahead

This week, we will receive more data that helps deepen our perspectives on housing market health, Q3 expectations, and the Fed’s upcoming plans.

In this time of dramatic headlines and geopolitical uncertainty, we want to remind you that you are in control of your wealth and financial future. No matter what the talking heads want you to believe, stay focused on market fundamentals. Please call or email if you have any questions concerning specific market data or larger, developing issues.

ECONOMIC CALENDAR  

Wednesday: New Home Sales
Thursday: Jobless Claims, Existing Home Sales
Friday: Durable Goods Orders, Janet Yellen Speaks

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Markets Turn Jittery – Weekly Update for August 14, 2017

August 14, 2017 By Leave a Comment

Last week, rising tension between North Korea and the U.S. rattled the world’s markets. As the two countries traded tough words, concerns escalated and markets reacted emotionally to the news. Though stress is building internationally, we remain committed to focusing on the market fundamentals that drive long-term value.

We recently published a special update outlining the details of how markets have reacted to other significant geopolitical events. History shows that markets can fall in the wake of alarming news but do recover, given time. We encourage you read through the post and talk to us if you have questions or concerns. You can find the special update HERE.

Amidst the pressure last week, volatility returned to markets—and all three major U.S. market indexes turned south. The Dow dropped 1.06%, the S&P 500 fell 1.43%, and the NASDAQ declined 1.50%. Global markets also reacted as the MSCI EAFE lost 1.59% for the week.

Though international developments dominated headlines, economic news important to markets and investors continued to roll out. The data reflects a solid economy, but some possible headwinds are on the horizon. Here are the highlights:

  • Impressive Corporate Earnings: Q2 corporate earnings reports both domestically and internationally were impressive. Reported corporate earnings in the U.S. increased an average of over 10% for the second quarter in a row—their first time doing so since 2011.
  • Low Inflation: The consumer price index, which measures changes to the average price of specific goods and services, rose only 0.1% in July. Expectations for a 0.2% increase failed to materialize as housing and travel costs, wireless services, and auto sales all slumped in July. At 1.7%, year-over-year inflation remains below the Federal Reserve’s targeted 2% growth rate. Continued low inflation may cause the Fed to rethink its plans to raise interest rates.
  • Rising Demand for Labor: Labor markets continue to be a key economic driver as evidenced by sharply rising job openings. June’s job openings jumped to 6.2 million from 5.7 million in May. Year-over-year, job openings climbed an impressive 11.3%. Moreover, jobless claims remain at historic lows.
  • High U.S. Household Debt: The current outstanding consumer debt of $12.7 trillion is now higher than the previous record reached in 2008. This debt load could wind up being a drag on consumer spending and the economy as a whole.

What Is Ahead

Tense geopolitical headlines may continue, but there will be plenty of market news, too. Retail, manufacturing, and housing data will come out this week, and Friday’s August consumer sentiment numbers will be of interest. Though the markets may move with emotions, economic fundamentals should continue to be the base for long-term value.

No matter what questions you may have, we always welcome you to reach out and contact us. We are here to help.

ECONOMIC CALENDAR

Tuesday: Retail Sales, Import and Export Prices, Housing Market Index, Business Inventories
Wednesday: Housing Starts
Thursday: Jobless Claims, Industrial Production
Friday: Consumer Sentiment

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Markets Remain Bullish – Weekly Update for August 7, 2017

August 7, 2017 By Leave a Comment

Another week of economic performance brought more news that the markets continue their bullish streak. After eight consecutive record-high closings, the Dow rose above 22,000 for the first time ever and finished the week up 1.20%. The S&P 500 was up 0.19% for the week, and the NASDAQ slightly fell by 0.36%. Meanwhile, the MSCI EAFE closed with a 0.82% increase.

The positive news continued with other upbeat reports. Manufacturing and employment each posted impressive numbers, suggesting a favorable Q3 start. And investors are looking ahead to possible Fed action on unwinding its balance sheet and bumping interest rates up again in December.

Here are key market developments that emerged last week:

Manufacturing Is On the Rise

Manufacturing is gaining speed as a key economic factor for Q3 and Q4. In June, new factory orders rose to almost a 10% annual increase, the best rate in the last 3 years. Unfilled orders also jumped 1.3% on rising demand for transportation equipment and capital goods. In addition, business confidence is at a 6-month high and inventories are up, though inflationary pressure remains soft. As a result, factory payrolls jumped 16,000 in July on top of June’s 12,000 increase.

Jobs Reports Remain Robust

Last Friday’s Employment Situation report marks the 5th time this year that payroll growth surpassed 200,000. While analysts predicted payrolls would grow by an additional 178,000, the actual number came in at 209,000. The solid employment increase helped lower the unemployment rate to 4.3%—the best rate since 2001.

Average hourly earnings also rose last week. The welcomed 0.34% increase on the month was the highest increase since October. Analysts hoped that low unemployment numbers would push yearly wage growth to over 3%, but year-to-date numbers continue to hover around growth of 2.5%.

Federal Reserve Weighs Options

Expect the Fed to raise interest rates in December by an additional ¼ point, though Fed Chair Janet Yellen has indicated that low inflation remains a concern for the economy. Despite robust financial markets, low unemployment, and a flourishing job market, inflation sits below the targeted 2% increase, with modest increases in both wage growth and consumer spending. Some analysts think that soft inflation could give pause to a year-end Fed rate hike.

Many observers believe the Federal Reserve will begin in September to shrink its $4.5 trillion balance sheet. The Fed balance sheet consists primarily of U.S. treasury bonds and mortgage-backed securities. To reduce this position, the Fed can either sell those securities, or it can opt not to reinvest securities as they mature.

What Is Ahead

Domestically

Widespread positive indicators are at the heart of a solid start to Q3. In addition to rebounding manufacturing activity and robust employment data, other aspects of the economy are brightening:

Internationally

In addition, economies around the world are moving in the right direction. The euro economies are showing continued strength, while emerging economies are expanding at their fastest rate since 2014.

As always, we encourage you to continue focusing on your long-term goals. Should you have any questions about the economy or your financial life, we are here for the conversation.

Economic Calendar

Tuesday: Job Openings and Labor Turnover Survey (JOLTS)
Thursday: Jobless Claims
Friday: Consumer Price Index

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Mixed Worldwide Markets – Weekly Update for June 12, 2017

June 12, 2017 By Leave a Comment

Markets were mixed last week with leading tech stocks falling dramatically as some investors pulled profits. The NASDAQ took the biggest hit, finishing 1.55% down on the week—its worst week of the year. Meanwhile, the Dow rose 0.31% for the week, notching another record close on Friday. The S&P 500 fell 0.30%, and the MSCI EAFE closed the week down 1.22%.

The S&P tech sector dropped 3.3% on Friday; however, it remained up 18% for the year. Major tech stocks account for almost 13% of the total number of stocks in the S&P 500, while comprising nearly 40% of the S&P 500 increase for the year.

Internationally, Asian markets were mixed while European markets closed the week generally higher. The European equities markets took last week’s UK election in stride, though the pound dropped in response to the Conservatives losing their majority.

Domestically, monthly job openings exceeded 6 million in April. Hiring, however, has slowed to only 5 million per month, suggesting workers’ skills may not match job needs. Moreover, the economy continues to show signs of softening.

Indications of a Softer Economy

  • Wholesale and Retail Inventories Down: Revised wholesale inventories shrunk 0.5% in April, the largest contraction in more than 12 months. In addition, retail inventories fell in April as sales weakened.
  • Inflation Slows: As noted last week, consumer prices remain weak. Inflation slowed in April to an annual rate increase of 1.7% year-over-year, down from the 1.9% recorded in March and 2.1% in February. Falling oil prices, excessive auto inventories, and increasing apartment rental inventories will all create headwinds to reaching the Fed’s target rate of 2.0%.
  • Factory Orders Down: Factory orders fell 0.2% in April. While motor vehicles rose 0.6% and computers gained 1.6%, durable goods orders fell 0.8%.
  • Oil Prices Drop: Though summer driving season is here, U.S. gasoline demand dropped by nearly a half-million barrels a day. While the need for fuel fell—and despite beliefs that oil would fall by 3.5 million barrels—stockpiles rose by 3.3 million barrels. As a result, oil dropped by 4%, ending the week at $45.86 per barrel.

What Comes Next

The Fed will hold a meeting this week to determine whether to raise interest rates. Expectations are that the Federal Open Market Committee (FOMC) will raise the fed funds rate 0.25% to 1.25% despite the soft economic news, which the Fed characterized as “transitory.” The FOMC meeting will also address quarterly forecasts for the remainder of the year. The markets expect both Japan and Britain’s central banks to also address the issue of interest rates.

In addressing the federal debt, the Treasury Secretary assured last week that the U.S. will not default on its debt. Congress must address the debt limit this summer or fall, but markets may react negatively if delays occur. Meanwhile, Congress continues to wrestle with policy questions around tax reform, an infrastructure program, and healthcare reform. How the government addresses these important initiatives could alter market dynamics in the future.

If you have questions on where you stand as these events unfold, do not hesitate to contact us. We are here to support your financial life with clarity and sound perspectives.

ECONOMIC CALENDAR

Wednesday: Consumer Price Index, Retail Sales, Business Inventories, FOMC Meeting Announcement
Thursday: Industrial Production, Housing Market Index
Friday: Housing Starts, Consumer Sentiment

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Economic Volatility: Where Are The Markets In Response? – Weekly Update for June 5, 2017

June 5, 2017 By Leave a Comment

Last week, the S&P 500, Dow, and NASDAQ closed at all-time record highs. The S&P 500 rose 0.96%, the Dow gained 0.6%, and the NASDAQ grew by 1.54%. Meanwhile, the MSCI EAFE gained 1.64% for the week.

Despite strong equity markets, bond yields dropped to their lowest point in the year. The drop in yield caused by rising bond prices, combined with soft employment numbers and low wage growth, could suggest a slowing economy or a tightening labor market.

While the U.S. equity markets advanced to new highs and bond prices rose, other markets were mixed for the week. Pending home sales dropped 1.3% in April, a second straight month of decline. Oil fell to $47.66 a barrel, the dollar dropped to a seven-month low against the euro, and gold gained 0.8% closing at $1,280.20.

Additionally, soft employment numbers and flat wages could lead to a disappointing Q2 Gross Domestic Product (GDP). With an eye on dropping inflation, the Fed will have to decide whether to still raise interest rates.

Mixed Job Numbers and Slow Wage Growth

May’s job growth reported an anemic 138,000, well below the expected 185,000. At the same time, average hourly wages increased on a year-over-year basis by only 2.5%. Moreover, the revisions to March and April’s payroll numbers fell by 66,000 jobs. The economy is currently averaging 162,000 new jobs per month for the year—again, well below 2016’s 187,000 average.

Despite the unemployment rate falling to 4.3%, the lowest it’s been in over 15 years, the employment-to-population ratio also fell. Still, the data confirms that demand for experienced and skilled workers exists, while the supply is falling.

Fed Will Discuss Raising Interest Rates

On June 14, the Fed FOMC will meet to determine if an interest rate increase is in order. Despite the soft employment numbers and an inflation rate below the Fed’s target of 2%, traders still believe there is a nearly 88% chance that the Fed will raise rates in June. However, the market consensus currently suggests only a roughly 50/50 chance for another rate increase before the end of the year.

International News and Looking Ahead

Manufacturing in China has posted strong returns. Both the manufacturing and non-manufacturing PMIs reported gains above 50. The numbers suggest that China is on track to reach its targeted 6.5% growth for the year. This matters because China is the world’s second largest economy at $11 trillion GDP for 2017.

Other developments in the international arena could influence markets going forward. Reaction to President Trump’s decision to leave the Paris Climate Accord could adversely affect American products in the international markets. The landmark decision also runs the risk of hurting U.S. tech and alternative energy companies.

We will continue to follow developing international and national news as they move the markets. As always, if you have questions about how these events may affect your finances, please contact us. We are here to help you remain informed and in control of your financial future.

Economic Calendar

Monday: Factory Orders, ISM Non-Manufacturing Index
Tuesday: JOLTS (Job Openings and Labor Turnover Survey)
Thursday: Jobless Claims

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Strong Markets & A Positive Outlook – Weekly Update for May 30, 2017

May 30, 2017 By Leave a Comment

The markets marched ahead last week with the S&P 500 and the NASDAQ reporting all-time records, albeit just slightly above previous highs. The S&P rose 1.43% over last week, while the NASDAQ was up 2.08%. The Dow gained 1.32% and the MSCI EAFE gained 0.14% for the week. Volatility subsided as the CBOE Volatility Index, which gauges fear in the market, fell to 9.8 at the end of the week.

A few important economic developments also caught our attention.

Market News for the Week

  • Strong Corporate Earnings  

Corporate earnings remain a bright spot as approximately 75% of S&P 500 companies beat their Q1 earnings estimates. S&P 500 corporate earnings are averaging a 13.9% increase—the best performance in over 5 years.

  • First Quarter GDP Revised Upward

The good news is that Q1 GDP revised upward from 0.7% to 1.2% growth. However, the economy continues to grow at a less-than-robust rate at approximately 2% on a year-over-year basis, as it has since 2011.

  • Oil Prices Fall  

U.S. crude ended the week at $49.80 after prices fell almost 5% on Thursday following OPEC’s announced 9-month extension to limit oil production. Investors remain cautious; U.S. oil production has spiked by over 10% in the last year, keeping oil prices down by offsetting reduced OPEC production.

  • Softening Housing Sales

New home sales fell 11.4% in April to an annualized rate of 569,000. Median new home prices dropped 3.0% to $309,200, as sales are tracking for only a modest 0.5% gain for the year. April’s existing home sales dropped 2.3% in another indication of softening home sales.

  • The Fed’s Plan to Tighten Its Balance Sheet  

As expected, the Federal Reserve FOMC unveiled a proposal to gradually unwind its $4.5 trillion balance sheet with monthly limits. The process is likely to begin later in the year, though the Fed has not announced a specific date.

Heading Into Summer

After Memorial Day, the shortened workweek brings more attention-worthy reports as investors will continue to evaluate the prospects for a stronger Q2 GDP performance. Tuesday’s April consumer spending reports and Friday’s trade data should give us a better picture of where Q2 GDP is heading.

Investors will continue to monitor the U.S. trade gap. April exports were down 0.9% while imports were up 0.7%, creating an unfavorable gap of $67.6 billion. Investment in new equipment will also provide investors with another important indicator of future economic growth. New equipment orders have so far remained flat for the year, though. Finally, the Fed’s plans for a possible interest rate hike in June will be on investors’ radar.

If you have questions about where you stand today or how to prepare for tomorrow, we are here to talk. Our goal is to give you the facts and insight you need to remain informed and in control of your financial future.

ECONOMIC CALENDAR

Monday: Closed
Tuesday: Consumer Confidence
Wednesday: Motor Vehicle Sales, Pending Home Sales
Thursday: ADP Employment Report, Construction Spending, PMI Manufacturing Index
Friday: Employment Situation

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Volatility Returns: The Markets’ Response to Change – Weekly Update for May 22, 2017

May 22, 2017 By Leave a Comment

Early last week, both the S&P and NASDAQ recorded all time highs before tumbling along with the Dow as political concerns rose. By Friday, though, the markets had largely rebounded and steadied. The S&P 500 closed the week down 0.38%, the Dow saw a 0.44% loss, and the NASDAQ reported a 0.61% decline. The MSCI EAFE reported up 0.79% for the week.

The CBOE VIX is designed to measure market volatility by using S&P 500 put and call index option prices. For most of the year, volatility in the markets has been low. However, the CBOE Volatility Index (VIX) spiked 40% midweek before falling back by week’s end, indicating a possible increase in market volatility.

Through the week’s ups and downs, investors followed some other important economic developments.

LAST WEEK’S DEVELOPMENTS:

  • Solid Regional Business Index
    The Philadelphia Fed Business Outlook Survey again pointed to progress in the factory sector. While the consensus range was 16.0 – 25.0, the General Business Conditions Index-Level reported 38.8.
  • Mixed Housing Reports
    New home sales remained strong as the housing market index rose 2 points to 70. The data came out well ahead of the 65 – 69 consensus range. However, April housing starts were lower than expected. Housing starts are now at a 1.172 million annualized rate, after falling 2.6%.
  • Household Debt Rises
    Total household debt rose to a new high, reporting a $149 billion increase to come in at $12.73 trillion. Student loans and auto loans were major contributors to the rising debt:

WHAT’S AHEAD

Economy
Manufacturing output rose 1.0 percent in April, the strongest monthly result in over 3 years. As such, investors will track how the rest of the second quarter shakes out. In addition, we will be interested in this week’s housing reports, hoping for a better handle on where this up-and-down sector is heading.

Geopolitical
Financial markets could experience some headwinds as geopolitical situations fester. Concerns over North Korea and political opposition to globalization remain. In addition, Brazil is facing political disruption and a deep recession that could mean problems for companies with business interests in that country. Similarly, continuing political challenges for the Trump administration may adversely affect proposed tax reform, health-care legislation, and infrastructure initiatives.

As always, we will continue keeping abreast of market and economic updates. We encourage you to focus on your long-term financial outlook. Should you have any questions, we are happy to help.

ECONOMIC CALENDAR

Tuesday:  New Home Sales
Wednesday:  Existing Home Sales
Friday: Durable Goods Orders, Consumer Sentiment

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Mixed Signals, Positive Performance – Weekly Update for May 8, 2017

May 8, 2017 By Leave a Comment

Last week, stocks rose but floated within a narrow trading range. By Friday, however, both the S&P 500 and the NASDAQ reached record highs. For the week, the S&P 500 gained 0.63%, the Dow finished up 0.32%, and the NASDAQ rose 0.88%. The MSCI EAFE added 1.7%.

Overall, we experienced another week of generally positive, but somewhat mixed, economic signals. Soft auto sales and tumbling oil prices offset increased job creation and the lowest unemployment recorded in a decade.

POSITIVE MARKET NEWS

  • Increased Job Creation and Low Unemployment
    In April, U.S. payrolls added 211,000 jobs, exceeding the 190,000 predicted and showing a significant bounce back from March’s 79,000 increase. The jobless rate also dropped to 4.4%—the lowest it has been since May 2007. The economy added jobs in several industries:

    • Leisure and hospitality: +55,000 jobs
    • Health care: +20,000 jobs
    • Mining: +9,000 jobs
    • Professional and business services: +39,000 jobs
    • Government: +17,000 jobs
  • Strong Corporate Earnings
    First quarter earnings season continued last week, and U.S. companies once again reported strong results. So far, companies with majority overseas profits are reporting an average revenue growth of 19.9%, outperforming S&P 500 companies with domestic earnings only. This difference helps explain how corporations are reporting strong Q1 earnings despite sluggish economic growth in the U.S. during the same period.

MIXED SIGNALS

  • Auto Sales Below Expectations
    U.S. motor vehicle sales bounced up to an annualized rate of 16.9 million. Though April’s report falls below the predicted 17.2 million, it improves on March’s 16.6 million annualized rate.
  • Oil Prices Tumble
    Oil prices tumbled last week. Both June West Texas Intermediate (WTI) crude and July Brent crude finished the week down. WTI closed at $46.22 a barrel, falling approximately 6.3% below last week’s close. Brent crude fell by about 5.6% for the week to $49.10 a barrel.

LOOKING AHEAD

On Wednesday, May 3, the Federal Open Market Committee (FOMC) announced it would keep the federal funds target range at 0.75% to 1.00%. Nonetheless, the Fed remains encouraged that the second-quarter GDP will rebound, because they believe consumer fundamentals remain solid. This sentiment may indicate the FOMC will raise rates in their June meeting.
On Sunday, Emmanuel Macron won the French presidential election, as expected. Macron’s win should ease European Market concerns, as he is a centrist who supports global trade, the euro, and France’s continuing membership in the EU.

As we look ahead to this week, our analysis will include a variety of international and domestic focuses. In particular, consumer prices, retail sales, and business inventories will highlight economic reports for the week while oil prices also should remain in focus for investors.

ECONOMIC CALENDAR

Tuesday: JOLTS (tracks monthly changes in job openings)
Thursday: Jobless Report, Producer Price Index
Friday: Consumer Price Index, Retail Sales, Business Inventories, Consumer Sentiment

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Earnings, Taxes & International News: What’s the Market Impact? – Weekly Update for May 1, 2017

May 1, 2017 By Leave a Comment

Stocks continued their advance on generally strong earnings reports this week despite the GDP report showing a slow first quarter economy. The S&P 500 rose 1.51%, the Dow gained 1.91%, and the NASDAQ added 2.32%. On Tuesday, the NASDAQ posted record highs as it closed over 6,000 for the first time. Internationally, the MSCI EAFE was up 2.97%.

On Friday, April 28, we learned that first quarter GDP increased a modest 0.7%, lower than the reported consensus expectations of approximately 1%. Oil drilling and housing performed well, but consumer spending fell, largely due to poor auto sales and lower utility bills. Consumer spending, the largest segment of our economy, rose by only 0.3%.

While this growth is slower than the 2.1% last quarter—and the lowest we’ve experienced in three years—the picture is likely not as negative as it may seem at first. Not only did mild weather affect consumer spending on heating, but the government has also acknowledged its challenges accurately calculating data for first quarter GDP.

In addition to these GDP readings, a number of other events and data releases contributed to market performance this week.

Domestic Developments

  • Corporate Earnings Were Largely Positive
    Thus far in the first quarter, 79% of reporting companies published strong profits. In particular, consumer discretionary companies and commodity producers reported robust earnings while phone services and real estate investment trusts had weaker results.

  • Trump Announced Tax Plan
    President Trump outlined his new tax proposal, including plans to cut corporate taxes to 15%. Individual tax rates would fall to 10%, 25%, and 35% if Congress adopts the President’s plan.

International News

  • North American Trade Experienced Tension
    On Wednesday, April 26, reports that the U.S. may pull out of NAFTA created concern in financial markets. By Thursday, however, markets calmed after President Trump said he would agree to requests from Canada and Mexico’s leaders to renegotiate the decades-long trade deal. As these negotiations continue, two controversies lay in the background:

    • U.S. dairy farmers’ claims that Canadian action concerning milk imports violates the trade agreement.
    • A new tariff of up to 24% on Canadian softwood lumber that President Trump announced last week.

Finding the right solution for the negotiations is important to the U.S., Canada, and Mexico. NAFTA affects a significant portion of each country’s economy, including industries such as farming, automotive, and energy. Trade with the two countries accounted for approximately $584 billion in U.S. exports in 2016.

What’s Next

With Congress avoiding a shutdown last week, the markets should focus this week on:

  • Earnings reports
  • Construction spending
  • April auto sales
  • Manufacturing data
  • Federal Reserve meeting on Wednesday

By Friday, most remaining S&P 500 companies’ earnings reports will be in, including Apple, Facebook, and Pfizer. Looking ahead, we will watch for what economic stories emerge from the data we receive, including the upcoming jobs report. For now, despite the first quarter’s initially slow GDP growth of 0.7%, expectations continue for 2.5% growth in 2017.

ECONOMIC CALENDAR:

Monday: Construction Spending, Personal Income and Outlays, PMI Manufacturing Index, ISM Manufacturing Index
Wednesday: ADP Employment Report, PMI Service Index, ISM Non-Manufacturing Index
Thursday: International Trade, Productivity and Costs
Friday: Employment Situation

 

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Stocks Up on French Election Uncertainty – Weekly Update for April 24, 2017

April 24, 2017 By Leave a Comment

Domestic stocks posted losses on Friday, April 21, largely due to investor concerns about the French election. Despite these daily losses, U.S. indexes broke their two-week losing streak, with the S&P 500 adding 0.85%, the Dow gaining 0.46%, and the NASDAQ increasing 1.82%. International stocks in the MSCI EAFE grew by 0.18%.

What Did We Learn Last Week? 

  • The French Election Is Concerning Investors

Uncertainty surrounding France’s presidential election contributed to investor caution last week. After Sunday’s ballot, National Front candidate Marine Le Pen will advance to the second round of voting on May 7, which decides the new president. Le Pen has promised to remove France from the European Union if she wins, a choice that could affect markets and currencies.

  • Quarterly Earnings Reports Are Mostly Strong

By Friday morning, 95 companies in the S&P 500 had reported their quarterly earnings; 77% of them beat earnings-per-share estimates.

  • Existing Home Sales Jumped 4.4% in March

Sales of existing homes hit levels not seen since 2007, and median home prices are up 6.8% over a year ago. Supply levels remain tight, and demand is high, as 48% of homes sold last month were on the market for less than a month.

  • Housing Starts Declined 6.8% in March

While the headline number for housing starts may seem pretty disappointing, it largely reflects the results of a return to typical March weather after unseasonably mild weather boosted starts in January and February. Overall, housing starts are up 9.2% over this time last year.

  • The Consumer Price Index Missed Expectations

Declines in gas and other energy prices contributed to the U.S. Consumer Price Index (CPI) falling 0.3% in March—its first monthly decline in more than a year.

  • Tax-Plan Information May Be on the Horizon

On April 20, Treasury Secretary Steve Mnuchin indicated that tax reform remains important. The next day, President Trump said a tax plan should be coming this week.

  • Oil Prices Dropped

Crude oil prices fell below $50 a barrel after losing 2.15% on Friday. Investors are showing concern about whether output decreases by OPEC can balance out against increasing U.S. production and prevent oversupply.

What’s Ahead

Moving into the last week of April, we will learn both first quarter GDP readings and gain further insight into consumer confidence and housing performance. On Friday, April 28, initial readings for first quarter GDP will help deepen our understanding of where the economy stands right now. Consensus estimates are at a soft 1.1% growth, even lower than last quarter’s 2.1% increase. After seeing this week’s low CPI numbers, combined with retail and inventory data, Barclays decreased its GDP estimate to only 0.8%.

Last week provided a variety of data and perspectives that are continuing to reveal themselves. As momentum from the French presidential outcomes and our own economic growth unfolds, we will watch these developments closely. Meanwhile, we encourage you to continue a long-term focus on your goals, and we are here to discuss any questions you may have along the way.

ECONOMIC CALENDAR

Tuesday: S&P CoreLogic Case-Shiller HPI, New Home Sales, Consumer Confidence
Wednesday: EIA Petroleum Status Report
Thursday: Durable Goods Orders, International Trade in Goods, Pending Home Sales Index
Friday: GDP, Employment Cost Index, Consumer Sentiment

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