Monthly Archives: January 2018

Market Insights 1/31/2018

After beginning the day solidly higher, then turning on a dime to dip into negative territory following the Fed’s afternoon release of its monetary policy statement, stocks were able to post modest gains to close out the whipsaw session.

The Dow was up over 250 points to begin the day, with industrials leading the way courtesy of upbeat results from Dow member Boeing, as well as a somewhat positive takeaway from last night’s State of the Union address from President Trump.

However, a change in language in the Fed’s statement after agreeing to leave rates unchanged appeared to have rattled the markets and stoked speculation of a possible pick-up in the pace of rate hikes.

Treasury reversed course to finish mixed, and the U.S. dollar was lower, while gold and crude oil prices were higher.

The Markets…

The Dow Jones Industrial Average (DJIA) rose 73 points (0.3%) to 26,150

The S&P 500 Index increased nearly 2 points (0.1%) to 2,824

The Nasdaq Composite gained 9 points (0.1%) to 7,412

In heavy volume, 1.1 billion shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil rose $0.23 to $64.73 per barrel and wholesale gasoline added $0.02 to $1.89 per gallon

The Bloomberg gold spot price moved $7.58 higher to $1,346.17 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—shed 0.1% to 89.11

Fed stands pat, ADP employment report tops forecasts, mortgage apps decline

The Federal Open Market Committee (FOMC), meeting for the last time under the leadership of Chairwoman Janet Yellen, concluded its monetary policy meeting, unanimously agreeing to keep the target range for its fed funds rate steady at 1.25%-1.50%. The FOMC, based on information received since it met in October/November, stated that, “Gains in employment, household spending and business fixed investment have been solid, and the unemployment rate has stayed low,” removing previous references to disruptions from the hurricanes that hit the U.S. in 2017, adding that “market-based measures of inflation compensation have increased in recent months but remain low.” The Committee also said it “expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.” The Committee also voted to continue its program to shrink its balance sheet that it initiated in October.

The ADP Employment Change Report showed private sector payrolls rose by 234,000 jobs in January, above the Bloomberg forecast of a 185,000 gain, while December’s increase of 250,000 jobs was revised to a 242,000 increase. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader January non-farm payroll report, expected to show jobs grew by 180,000 and private sector payrolls rose by 181,000. The unemployment rate is predicted to remain at 4.1% and average hourly earnings are projected to rise 0.2% month-over-month.

Pending home sales rose 0.5% m/m in December, in line with projections, and following the upwardly revised 0.3% gain registered in November. However, y/y, sales were 1.8% lower, versus the projected 1.7% gain. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which slipped in December but posted the best year in 11 years.

The MBA Mortgage Application Index declined 2.6% last week, following the prior week’s 4.5% gain. The decrease came as a 2.9% drop in the Refinance Index was met with a 3.4% fall in the Purchase Index. The average 30-year mortgage rate gained 5 basis points to 4.41%.

Treasuries were mixed, as the yield on the 2-year note rose 3 bps to 2.16%, the yield on the 10-year note was flat at 2.72%, while the 30-year bond rate declined 3 bps to 2.94%. Treasury yields remain near multi-year highs and pressure on the U.S. Dollar continued keeping it at multi-year lows.

The markets are digesting last night’s first State of the Union address by President Donald Trump and looking to this afternoon’s Federal Open Market Committee (FOMC) monetary policy decision, which will be Chairwoman Janet Yellen’s last as the head of the Central Bank. The FOMC is not expected to announce another rate hike and the decision will be without updated economic projections and press conference by the Chairwoman, but scrutiny will likely be on the statement for clues to how many rate hikes we could see this year.

The economic calendar for tomorrow will remain busy, beginning with preliminary Q4 non-farm productivity and unit labor costs, anticipated to show increases of 0.7% and 0.9%, respectively, followed by weekly initial jobless claims, with economists expecting a slight uptick to a level of 235,000 from the prior week’s 233,000. After the opening bell, the ISM Manufacturing Index and Markit’s final Manufacturing PMI Index for January will be released, with the former expected to decline to a level of 58.6 from December’s 59.7, and the latter to match the preliminary read of 55.5, but up slightly from the prior month’s 55.1. Construction spending will round out the docket, predicted to have gained 0.4% m/m during December.

Europe and Asia mixed on data ahead of Fed decision

European equities were mixed, as the markets digested U.S. President Donald Trump’s State of the Union address and eyed the Fed’s monetary policy decision that will come later today. Also, earnings and economic data were mixed, with German retail sales falling more than expected in December, but the nation’s unemployment change declined more than expected for this month. The Eurozone consumer price inflation estimate came in a bit hotter than expected for this month. The euro and British pound were higher, as the U.S. dollar continues to drop, while bond yields in the region were mixed.

Stocks in Asia finished mixed following the two-day slide in the U.S. yesterday that came amid caution ahead of a heavy dose of earnings and economic events, with the markets digesting U.S. President Trump’s State of the Union address and looking to the Fed’s monetary policy decision later today. Also, the markets are digesting some diverging economic data in the region, with China’s Manufacturing PMI Index unexpectedly showing growth decelerated in January but its services sector companion surprisingly showed growth accelerated. Japan’s industrial production rose much more than expected, though South Korea’s industrial production unexpectedly dropped last month.

Stocks in Japan declined, with the yen choppy after yesterday’s gain, while those issues trading in Hong Kong rose, with financials gaining ground, but energy issues were lower on the drop in crude oil prices as of late, pressuring mainland Chinese equities. Indian securities decreased ahead of the nation’s GDP estimate after the closing bell that showed growth decelerated in 2017 to 7.1% from 8.0%, while listings in Australia rose modestly, as strength in the banking sector outweighed a decline in oil & gas stocks, and stocks in South Korea dipped following its industrial production data.

Fed expects inflation ‘to move up’ in 2018, signaling March rate hike

The Federal Reserve on Wednesday left a key short-term U.S. interest rate unchanged, but the central bank also said it expects inflation “to move up this year” in a sign it’s likely to hike rates at its next meeting in March. The central bank said inflation is likely to stabilize around its 2% target, dropping prior language about a recent decline in prices.

In another notable tweak, the Fed said “market-based measures of inflation compensation have increased in recent months.” Still, the Fed left its benchmark short-term rate at a range of 1.25% to 1.5%. In December, the central bank projected it would raise rates three times in 2018. The two-day meeting at the end of January was the the last for outgoing Chairwoman Janet Yellen.

Fellow board member Jerome Powell will replace her on Feb. 3.

Thoughts from the CIO

The S&P 500 continues to confound, rising 7.2% in price year to date through January 26, and recording 14 new all-time highs in only 18 trading days.

In addition, 87% of the 145 sub-industries in the S&P Composite 1500 trade above their 50-day moving average, which is equal to one standard deviation above the mean since 1990.

Also, the S&P 500 has advanced 34% in price since getting back to breakeven from the May 2015-Feb. 2016 sell-off versus the average post-correction climb of 9.5% before slipping into a new decline of 5% or more.

Finally, the 500 has gone 564 calendar days since the conclusion of the last decline of 5%+, which is longer than any period since 1945. Yet even though history guarantees that a decline will eventually materialize, it is inconclusive as to when a stock market trembler will finally strike.

What’s more, history implies that the market still has a very good chance of rising even further in the near term. The S&P 500 now stands at nearly 7% above its 50-day moving average, and 14% higher than its 200-day average – both of which exceed 1.5 standard deviations from their means since WWII. Following such dual extremes, however, the S&P 500 has risen in price in the subsequent three months an average of nearly 70% of the time.

U.S. Market Weekly Summary – Week Ending 01/26/2018

S&P 500 Rises 2.2% on Week to New High as Health Care, Telecom, Consumer Discretionary Lead Broad Climb

The Standard & Poor’s 500 index rose 2.2% this week, extending this year’s weekly winning streak to a fourth week and reaching yet another new high, as the health-care, telecommunications and consumer-discretionary sectors led a broad climb.

The market benchmark ended the week at 2,872.87, up from last week’s closing level of 2,810.30, which had been a new closing high at the time. Friday’s closing level marked both an intraday and a closing record for the S&P 500.

The health-care and telecommunications sector had the largest percentage gains of the week, up 3.5% each, followed by a 3.2% rise in consumer-discretionary stocks. All of the S&P 500′s sectors rose this week.

The advance came as U.S. companies’ Q4 earnings season moved into full swing. While the U.S. tax legislation passed in late 2017 has weighed on many companies’ Q4 bottom lines, their earnings excluding the tax impact have largely been pleasing investors, who are looking forward to the positive effects of the lower corporate tax rate going forward.

The S&P 500′s climb this week was also supported by the Commerce Department’s Friday report of gross domestic product being up 2.6% in Q4. While this was slightly weaker than the 2.9% growth expected and slower than the 3.2% pace posted in Q3 and a 3.1% rise in Q2, investors were still encouraged as GDP growth for 2017 of 2.5% marked a three-year high.

Among the health-care sector’s gainers, AbbVie (ABBV) shares surged 18% this week after the company reported strong year-over-year growth in Q4 adjusted earnings per share and revenue that topped analysts’ expectations. Abbvie also raised its forecast for 2018 adjusted earnings per share to well above the Street view.

In the telecommunications sector, shares of Verizon Communications (VZ) climbed 5.4% this week amid the report of Q4 revenue that exceeded analysts’ expectations and upbeat guidance for 2018. The company said it expects savings from the US tax overhaul to generate a net uplift of $3.5 billion to $4.0 billion to cash flow from operations in 2018 and to boost EPS by $0.55 to $0.65, net of impacts from employee and Verizon Foundation initiatives.

Market Insights 1/26/2018

U.S. stocks rallied Friday to close out a fourth-straight week of gains amid some upbeat earnings reports and despite a softer-than-expected advance read on Q4 GDP.

Treasury yields, gold and crude oil prices advanced, while the U.S. dollar continued to see pressure.

The Markets…

The Dow Jones Industrial Average (DJIA) increased 224 points (0.8%) to 26,617

The S&P 500 Index rallied 34 points (1.2%) to 2,873

The Nasdaq Composite jumped 95 points (1.3%) to 7,506

In moderate volume, 807 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil increased $0.63 to $66.14 per barrel and wholesale gasoline added $0.02 to $1.93 per gallon

The Bloomberg gold spot price gained $1.23 to $1,349.49 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 89.12

Markets rallied for the week, as the DJIA gained 2.1%, the S&P 500 Index surged 2.2% and the Nasdaq Composite ascended 2.3%

Stock rally into 2018 continues

U.S. stocks posted a fourth-straight weekly gain to start 2018, with all major sectors moving higher, underpinned by global economic optimism and earnings season showing revenue and profit beat rates exceeding 80%, per data of the 133 S&P 500 companies that have reported thus far compiled by Bloomberg.

Although several reports showed large one-time charges, guidance and plans to return capital to shareholders and employees preserved optimism regarding the impact of U.S. tax reform.

Stocks showed resiliency in the face of U.S. trade relation concerns, a temporary government shutdown, Treasury yields at over a three-year high, and a tumble in the U.S. Dollar Index to a fresh three-year low, which also preserved the rally in crude oil prices.

First look at Q4 GDP growth misses

The first look (of three) at Q4 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of expansion of 2.6%, after the unrevised 3.2% expansion in Q3, and below the 3.0% growth predicated by Bloomberg. Personal consumption gained 3.8%, above forecasts of a 3.7% rise and following the unadjusted 2.2% increase recorded in Q3. Along with personal consumption, positive contributions came from nonresidential and residential investment, exports and government spending, while a decline in private inventory investment and an increase in imports subtracted from output.

On inflation, the GDP Price Index came in at a 2.4% rise, topping expectations of a 2.3% gain and the unrevised 2.1% increase seen in Q3, while the core PCE Index, which excludes food and energy, moved 1.9% higher, matching expectations, and following the unadjusted 1.3% advance in Q3.

December preliminary durable goods orders (chart) were up 2.9% month-over-month, compared to estimates of a 0.8% gain, and November’s 1.3% increase was revised to a 1.7% rise. Manufacturing orders rose solidly and machinery demand grew, joined by a modest gain in autos, while the volatile components of defense and non-defense aircraft orders jumped to contribute mostly to the solid beat.

The advance goods trade deficit unexpectedly widened to $71.6 billion in December, from the downwardly revised $70.0 billion in November, and compared to expectations of $68.9 billion.

Preliminary wholesale inventories missed forecasts, increasing 0.2% m/m in December, versus forecasts for a 0.4% increase, and following November’s downwardly revised 0.7% gain.

Treasuries traded lower, with the yields on the 2-year note and the 30-year bond gaining 3 basis points to 2.12% and 2.91%, respectively, and the yield on the 10-year note rising 4 bps to 2.66%. Treasury yields continued to rally and are at multi-year highs while the woes for the U.S. dollar persisted, with the greenback sitting at multi-year lows.

The markets continued to grapple with persistent broad-based global economic growth and signs that global central banks may be turning down the path to normalization, along with the recent flare-up in U.S. trade concerns. However, the markets appeared to take in stride a speech by U.S. President Donald Trump at the World Economic Forum in Davos, Switzerland, in which he noted that he wants free, fair, open and reciprocal trade deals.

Europe mostly higher following data and amid trade focus

European equities finished higher, shrugging off the continued rally for the euro versus the U.S. dollar, which remains under pressure. The greenback has fallen to multi-year lows amid the backdrop of flared-up U.S. trade relation uncertainty and the European Central Bank’s upbeat economic outlook after yesterday’s unchanged monetary policy decision. The British pound also gained ground on the dollar, following stronger-than-expected reads on U.K. Q4 GDP and services sector activity.

Bond yields in the region moved to the upside. Earnings reports continued to paint a relatively positive picture and the markets appeared to smoothly digest the speech by U.S. President Donald Trump in Switzerland that was focused on trade and the softer-than-expected U.S. GDP report.

The U.K. FTSE 100 Index advanced 0.7%, Italy’s FTSE MIB Index finished 0.6% higher, France’s CAC-40 Index rallied 0.9%, Germany’s DAX Index and Switzerland’s Swiss Market Index increased 0.3%, and Spain’s IBEX 35 Index was flat.

Stocks in Asia finished mixed, with banking stocks continuing to support a rally in China, while the yen regained some upward momentum late in the session to weigh on Japanese markets after yesterday’s downside reversal overnight.

The currency markets have been volatile as the U.S. dollar has tumbled amid flared-up U.S. trade relations, but the greenback found some strength overnight following comments from U.S. President Trump on trade negotiations and clarifying recent comments about the dollar from Treasury Secretary Mnuchin.

Japanese equities finished lower on the yen’s gains late in the session, while data showed the nation’s consumer price inflation rose mostly in line with forecasts for December. Shares trading in mainland China and in Hong Kong gained ground. South Korean stocks advanced and markets in Australia and India were closed for holidays.

Market Insights 1/25/2018

Mixed Finish for Stocks

U.S. stocks finished mixed as the Dow was able to post solid gains, finding support from some upbeat earnings results from 3M and Caterpillar.

Shares in energy and tech companies lagged, while the U.S. dollar erased losses on a sharp reversal following comments from President Trump.

Treasury yields were mostly lower, crude oil prices dipped and gold saw a minor decline.

The Markets…

The Dow Jones Industrial Average (DJIA) increased 141 points (0.5%) to 26,393

The S&P 500 Index added 2 points (0.1%) to 2,839

The Nasdaq Composite decreased 4 points (0.1%) to 7,411

In moderate volume, 887 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil ticked $0.10 lower to $65.51 per barrel and wholesale gasoline shed $0.02 to $1.91 per gallon

The Bloomberg gold spot price lost $9.82 to $1,348.64 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 89.27

Jobless claims rebound less than expected, Leading Indicators top forecasts

Weekly initial jobless claims rose by 17,000 to 233,000, versus the Bloomberg expectation calling for a gain to 235,000, with the prior week’s figure being downwardly revised by 4,000 to 216,000. The four-week moving average decreased by 3,500 to 240,000, while continuing claims fell 28,000 to 1,937,000, north of estimates of 1,925,000.

The Conference Board’s Index of Leading Economic Indicators (LEI) for December rose 0.6% month-over-month, above projections to match November’s upwardly revised 0.5% gain. The index has not seen a decline since May 2016. The stronger-than-expected rise came courtesy of ISM new orders, stock prices, credit, the yield curve and consumer expectations.

New home sales fell 9.3% m/m in December to an annual rate of 625,000 units, versus forecasts calling for 675,000 units and the revised 659,000 unit pace in November, which remained the highest level since 2007. The median home price was up 2.6% y/y to $335,400. New home inventory jumped to 5.7 months of supply at the current sales pace from 4.9 in November. Sales declined m/m in all regions . New home sales are based on contract signings instead of closings.

The Kansas City Fed Manufacturing Activity Index for January showed growth unexpectedly accelerated, with the index rising to 16 from 14 in December, where it was projected to remain. A reading above zero denotes expansion.

Treasuries finished mostly lower, with the yield on the 2-year note flat at 2.08%, while the yield on the 10-year note declined 3 basis points (bps) to 2.61%, and the 30-year bond rate decreased 5 bps to 2.88%. Treasury yields have rallied recently to multi-year highs and the U.S. dollar has seen an accelerated drop to fresh multi-year lows amid a flare-up in U.S. trade concerns and as global central banks appear to be turning down the path to normalization.

Adding to the backdrop, the stock markets remain at record high levels on broad-based global economic growth and optimism regarding tax reform. Tomorrow, the economic calendar will bring the first look (of three) at Q4 GDP, projected to expand by a quarter-over-quarter annualized rate of 3.0%, on the heels of the growth of 3.2% and 3.1% in Q3 and Q2, respectively. Growth in personal consumption is expected to accelerate from a 2.2% rate in Q3 to a 3.7% pace.

We still believe that the bull has room to run as domestic economic strength is improving and global economies look better than they have in some time, but volatility should pick up and the possibility of a larger pullback than what we saw last year has grown so investors should stay disciplined, diversified and invested.

Equities in Europe and Asia trade lower

European equities finished mostly lower after a late-day slide, with the euro and British pound gaining ground on the heels of the accelerated drop in the U.S. dollar to multi-year lows and following the European Central Bank’s (ECB) unchanged monetary policy decision. During the closely-followed customary press conference after the decision, ECB President Mario Draghi said the increasing economic momentum is bolstering confidence that inflation will move toward its target.

The euro added to early gains to extend a recent run to a fresh three-year high following the remarks. Draghi noted that the recent volatility in the foreign exchange markets represents a source of uncertainty and requires monitoring. He added that a discussion regarding changing its guidance has not really started. Bond yields in the region finished mostly higher, while a host of mixed earnings reports on both sides of the pond are being digested. In other economic news, German business confidence came in mixed for January.

Stocks in Asia finished mostly to the downside, ahead of the European Central Bank decision, while the U.S. dollar’s continued drop remained in focus. Also, the rollover in technology issues that hampered the U.S. markets yesterday weighed on the markets. Japanese equities fell with the yen gaining noticeable ground on the U.S. dollar, while shares trading in mainland China and Hong Kong found pressure as financials joined the softness in the technology sector to weigh on the markets. Australian securities dipped and Indian equities declined, while some upbeat earnings reports helped overshadow a disappoint Q4 GDP report to lift South Korea stocks.

Market Insights 1/24/2018

U.S. stocks finished mixed as pressure on technology issues weighed on the Nasdaq, while a glut of earnings results fostered mixed reactions and existing home sales fell more than expected.

The U.S. dollar was under pressure, continuing its recent drop on trade concerns.

Treasury yields maintained a recent run, crude oil prices gained ground on the heels of a mixed government inventory report and gold rallied.

The Markets…

The Dow Jones Industrial Average (DJIA) increased 41 points (0.2%) to 26,252

The S&P 500 Index declined 2 points (0.1%) to 2,838

The Nasdaq Composite decreased 45 points (0.6%) to 7,415

In moderately heavy volume, 949 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil advanced $1.14 to $65.61 per barrel and wholesale gasoline added $0.02 to $1.93 per gallon

The Bloomberg gold spot price rallied $17.01 to $1,341.16 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 1.0% to 89.24

Existing home sales drop

Existing-home sales in December fell 3.6% month-over-month to a 5.57 million annual rate, compared to the Bloomberg forecast of a 5.70 million pace, and versus November’s revised 5.78 million rate. However, 2017 was the best year for sales in 11 years. Sales of single-family homes declined 2.6% m/m and purchases of multi-family structures dropped 11.6%, but both were still up y/y. The median existing-home price was 5.8% above year ago levels at $246,800. Unsold inventory came in at a 3.2-months pace at the current sales rate—a record low—down from last year’s 3.6 months rate. Inventory of homes for sale is down 10.3% y/y. Sales were lower m/m in all regions. Existing home sales are based on contract closings instead of signings and account for the majority of the housing sales market.

The National Association of Realtors (NAR) said despite the decline in December, existing home sales for the year were guided higher by a multi-year streak of exceptional job growth, which ignited buyer demand. However, the NAR noted that new listings struggled to keep up with what was sold very quickly and buying became less affordable in a large swath of the country, muting what should have been a stronger sales pace.

The MBA Mortgage Application Index increased 4.5% last week, following the prior week’s 4.1% gain. The solid growth came as a 0.9% rise in the Refinance Index was met with a 6.1% jump in the Purchase Index. The average 30-year mortgage rate gained 3 basis points (bps) to 4.36%.

Treasuries finished lower, with the yields on the 2-year and 10-year notes and the 30-year bond rate rising 3 bps to 2.08%, 2.65% and 2.93%, respectively. Treasury yields extended a recent rally to multi-year highs and the U.S. dollar fell to fresh multi-year lows exacerbated by flared-up U.S. trade relations and as global central banks appear to be turning down the path to normalization. The greenback’s troubles were amplified by Treasury Secretary Mnuchin reiterating that a weak dollar is favorable for trade, while Commerce Secretary Ross suggested the Trump administration could enact more tariffs after approving tariffs on solar cells and certain washing machines earlier this week, per Bloomberg.

Tomorrow, the U.S. economic calendar will also offer weekly initial jobless claims, forecasted to increase to 235,000 from the prior week’s 220,000, followed by the Index of Leading Economic Indicators, expected to have increased 0.5% m/m for December following November’s 0.4% increase. The January Kansas City Fed Manufacturing Index will round out the day, forecasted to remain at December’s level of 14 with a reading above 0 indicating expansion in activity.

Europe lower ahead of ECB decision, Asia mostly higher

European equities finished mostly lower, with lingering global economic and earnings optimism being countered by rallies for the euro and British pound as the U.S. dollar continued a tumble to fresh multi-year lows. The markets appear to be trading a bit cautious ahead of tomorrow’s monetary policy decision from the European Central Bank (ECB) and as U.S. trade relation concerns flared up. Ahead of the ECB’s decision, Markit’s preliminary Eurozone Composite PMI Index—a gauge of business activity out of both the services and manufacturing sectors—unexpectedly showed growth accelerated in January to the fastest pace of growth in almost 12 years, per Bloomberg. Bond yields in the region gained ground.

The U.K. FTSE 100 Index and Germany’s DAX Index dropped 1.1%, France’s CAC-40 Index decreased 0.7%, Spain’s IBEX 35 Index declined 0.4%, and Italy’s FTSE MIB Index fell 0.9%, and Switzerland’s Swiss Market Index finished little changed.

Stocks in Asia finished mostly higher amid the persistent global economic and earnings optimism, though gains were likely limited by flared-up U.S. trade relation concerns after President Trump recently approved tariffs on imported solar cells and certain washing machines. Also, the recent drop in the U.S. dollar garnered attention with the yen gaining ground to weigh on Japanese equities despite a read on manufacturing activity that showed growth accelerated this month. Japan also reported that export growth in December slowed more than expected.

Mainland Chinese shares advanced and stocks in Hong Kong extended a string of gains, posting the best start to a year in more than three decades, per Bloomberg. Australian securities gained ground, while equities trading in both India and South Korea ticked higher.

Market Insights 1/23/2018

U.S. equities finished mixed amid a slew of divergent earnings reports, with positive results from Travelers overshadowed by disappointing reports from Procter & Gamble, Johnson & Johnson and Verizon to weigh on the Dow.

Treasury yields continued to pare back after touching multi-year highs and the U.S. dollar extended its drop to multi-year lows, while gold and crude oil prices finished higher.

The Markets….

The Dow Jones Industrial Average (DJIA) fell 4 points to 26,215

The S&P 500 Index gained 6 points (0.2%) to 2,839

The Nasdaq Composite jumped 52 points (0.7%) to 7,460

In moderate volume, 792 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil advanced $0.90 to $64.47 per barrel and wholesale gasoline added $0.03 to $1.91 per gallon

The Bloomberg gold spot price gained $7.24 to $1,341.16 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.3% to 90.13

Growth in regional manufacturing activity slows more than expected

The Richmond Fed Manufacturing Activity Index fell to 14 in January from 20 in December, versus the Bloomberg estimate of a decrease to 19. However, readings above zero denote expansion. Shipments and employment solidly declined but continued to grow, while new order volume was unchanged at 16 and order backlog moved back into expansion territory.

Treasuries were higher, with the yields on the 2-year and 10-year notes, as well as the 30-year bond falling 3 basis points to 2.04%, 2.62% and 2.90%, respectively.

Treasury yields have pared a recent rally to multi-year highs and the U.S. dollar has extended a fall to multi-year lows, amid the backdrop of broad-based global economic growth, early optimism regarding tax reform, and as global central banks appear to be turning down the path to normalization. The markets have mostly shrugged off the recent flare-up in political uncertainty as Congress yesterday voted on a short-term funding bill that ended a three-day government shutdown.

The 10-year Treasury yield has grinded higher since hitting a near 10-month low in early September, but housing sales have yet to show signs of slowing, with November existing home sales jumping to near an 11-year high. Tomorrow, as the U.S. economic calendar heats up, we will get the latest read on existing home sales, expected to dip 1.9% month-over-month to an annual rate of 5.7 million units in December.

Europe mixed amid eased political uncertainty, Asia higher after BoJ decision

European equities finished mixed, with yesterday’s vote to end the U.S. government shutdown joining signs of progress in German coalition talks to ease political concerns, though U.K. Brexit uncertainty lingered. Earnings and economic data in the region also aided sentiment, as German investor confidence rose to an eight-month high and eurozone consumer confidence topped forecasts for January.

However, the euro turned higher versus the U.S. dollar, which extended its recent drop, to cause the markets to diverge ahead of Thursday’s monetary policy decision from the European Central Bank. The British pound moved lower in choppy trading versus the greenback, while bond yields in the region were mostly lower.

The U.K. FTSE 100 Index, Switzerland’s Swiss Market Index and Spain’s IBEX 35 Index rose 0.2%, France’s CAC-40 Index dipped 0.1%, Germany’s DAX Index advanced 0.7%, and Italy’s FTSE MIB Index decreased 0.2%.

Stocks in Asia finished higher, with the U.S. ending a three-day government shutdown and the Bank of Japan (BoJ) holding its monetary policy steady. As the BoJ kept its monetary policy stance unchanged, Governor Kuroda delivered his post-decision briefing and appeared to try to dampen expectations that the central bank was heading toward changing its current monetary policy stance, which had risen as the BoJ recently trimmed its monthly asset purchases.

Stocks in Japan rallied with the yen showing some early weakness versus the U.S. dollar. Financials were higher to boost markets in China and Hong Kong, while equities in Australia, South Korea and India also advanced nicely.

Market Insights 1/22/2018

U.S equities notched new record highs, boosted by a Senate vote to reopen the government after a three-day shutdown, as well as a slew of M&A announcements.

Treasury yields retreated slightly from a recent rally to multi-year highs and the U.S. dollar added to its drop as of late to multi-year lows.

Lastly, crude oil and gold prices saw modest gains.

The Markets….

The Dow Jones Industrial Average rose 143 points (0.6%) to 26,215

The S&P 500 Index gained 23 points (0.8%) to 2,833

The Nasdaq Composite jumped 72 points (1.0%) to 7,408

In moderate volume, 855 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil advanced $0.26 to $63.57 per barrel and wholesale gasoline added $0.02 to $1.88 per gallon

The Bloomberg gold spot price gained $2.99 to $1,334.83 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.2% to 90.40

Yields dipping from multi-year highs, pressure on dollar continues ahead of data and amid politics

Treasuries finished slightly higher, with the economic calendar void of any major releases today. The yield on the 2-year note was flat at 2.07%, while the yields on the 10-year note and the 30-year bond dipped 1 basis point (bp) to 2.65% and 2.92%, respectively.

Treasury yields remain at multi-year highs and the U.S. Dollar Index at multi-year lows, with the markets grappling with synchronized global economic growth, flared-up political uncertainty as the U.S. government remains shut down for a third day, and world monetary policy appearing to be heading toward the path to normalization

The Federal Reserve’s program to shrink its balance sheet will likely push bond yields higher as the market will need to absorb more supply, while stronger economic growth globally, a tight labor market and tax cuts point to a potential pickup in inflation in 2018. She adds that markets appear complacent, while with rates low, the yield curve relatively flat and credit spreads very narrow, fixed income markets aren’t priced for higher inflation or volatility.

The Senate secured enough votes to pass a three-week funding bill and allow the government to reopen, with a House vote expected to follow with the same result. Despite the shutdown, the stock markets are back at all-time highs despite the flared-up political uncertainty.

The week will culminate with Friday’s first look (of three) at Q4 GDP, which is expected to decelerate to a 3.0% annualized pace of growth. However, with only a small fraction of S&P 500 companies having reported thus far, earnings season is poised to kick into a higher gear this week and likely dominate the attention.

Europe higher, Asia mixed as political front takes center stage

European equities finished mostly higher, even as the euro rose versus the U.S. dollar, ahead of this week’s monetary policy decision from the European Central Bank. The British pound also gained ground on the greenback to hamstring the U.K. markets, while bond yields in the region are mixed. The political front garnered the heaviest attention as the U.S. government faced a vote today on a short-term spending bill as the shutdown entered its third day, while German coalition government talks appear to be progressing.g.

The U.K. FTSE 100 Index was down 0.2%, while Germany’s DAX Index and Switzerland’s Swiss Market Index rose 0.2%, France’s CAC-40 Index was up 0.3%, Spain’s IBEX 35 Index rallied 1.0%, and Italy’s FTSE MIB Index gained 0.5%.

Stocks in Asia finished mixed as the U.S. government shutdown continued to garner attention, while this week’s monetary policy decision from the Bank of Japan (BoJ) headlines a host of key economic data set to be released in the region.

Stocks in Japan finished flat with the yen little changed versus the U.S. dollar, mainland Chinese equities and those traded in Hong Kong advanced, while financials weighed on Australia’s markets, and technology stocks pressured South Korean securities.

U.S. Market Weekly Summary – Week Ending 01/19/2018

S&P 500 Posts 0.9% Weekly Increase to Another New Closing High, Led by Staples, Health Care, Technology

The Standard & Poor’s 500 index added 0.9% this week, extending its climb so far this year to yet another closing high, driven this time by consumer staples, health care and technology.

The S&P 500 ended this week at 2,810.30, up from last week’s closing level of 2,786.24 and marking another closing high. The index also hit a new intra-day high Friday at 2,810.33.

Consumer staples had the largest percentage increase of the week, up 2.4%, followed by a 1.9% climb in health care and a 1.5% rise in technology.

Meanwhile, the energy and industrial sectors, which had been the top two sectors last week, had the biggest percentage declines of the week among the S&P 500′s sectors. Energy slipped 1.3% while industrials fell 0.9%.
This week’s moves came as US companies began releasing their Q4 results. While some companies have reported negative Q4 impacts related to the US tax overhaul that passed in late December, executives and investors appear to remain optimistic for the effects of the new tax law on corporate earnings going forward.

In consumer staples, shares of Wal-Mart Stores rose 3.7% this week. The big-box retailer named Judith McKenna CEO and president of Walmart International. Also, Goldman Sachs upgraded its investment rating on the shares to conviction buy from neutral, citing the retailer’s strong strategic position selling consumables to middle-income consumers in small markets and predicting a dividend increase.

Among the health-care sector’s gainers, UnitedHealth Group shares jumped 6.4% this week amid the health-benefits and technology-enabled-health-services company’s report of better-than-expected Q4 results. Following the report, UnitedHealth’s stock received price-target increases from firms including Oppenheimer, BMO Capital Markets and Argus Research.

In the technology sector, this week’s advancers included Cognizant Technology Solutions, up 3.7%. Citigroup upgraded its investment rating on the professional-services company’s stock to buy from neutral. Cognizant plans to release its Q4 results on Feb. 7.

On the downside, the energy sector’s decline came as crude-oil futures pared back from three-year highs hit earlier in the week. Among the decliners, shares of Kinder Morgan (KMI) slipped 2.6% this week despite the company’s report of better-than-expected Q4 adjusted earnings per share and revenue and plans to increase its dividend.

In the industrial sector, shares of General Electric (GE) tumbled 13% this week as the manufacturing conglomerate revealed expectations to book a $6.2 billion charge for Q4 as a result of a review and reserve testing for GE Capital’s run-off insurance portfolio, North American Life & Health.