Weekly Market Update, January 30, 2017
Presented by Rich Tegge
General market news
• The 10-year Treasury yield opened early this Monday morning at 2.46 percent, down from last week’s high of 2.55 percent. It has tested the 2.50-percent level a handful of times since mid-December but has come back down each time. Likewise, the 30-year yield seems to be having difficulty breaking through the 3.12-percent level, where it stood late last week. It opened at 3.04 percent this Monday morning.
• The three major U.S. equity indices all posted gains last week. The Nasdaq Composite led the way with a gain of 1.91 percent, while the S&P 500 moved up by 1.04 percent. The top-performing sectors were materials, technology, and financials; the worst-performing sectors included telecom, real estate, and utilities as the markets favored growth.
• President Trump signed a slew of executive orders in his first week in office. The market reacted favorably to the new administration’s passive stance on regulation; Trump has stated that he wants to cut regulations by 75 percent or more. Other executive orders included the approval of the Dakota Access and Keystone XL oil pipelines, as well as the U.S. withdrawal from the Trans-Pacific Partnership trade deal.
• The first estimate of fourth-quarter gross domestic product came in below expectations at 1.9-percent annualized growth, hurt by lower net exports and a slight slowdown in consumption. There were some positives in the report, however, as business, equipment, and residential investment all showed signs of improvement. On the housing front, both existing and new home sales declined in December, with existing home sales hampered by lack of supply. Lastly, durable goods orders dropped for the second straight month in December, as defense aircraft orders pulled the number down.
What to look forward to
The week’s news begins with Personal Income and Outlays numbers for December, with both income and spending expected to have improved. We will also see ISM Manufacturing and Non-Manufacturing data.
The Federal Reserve isn’t expected to change its policy rate during its upcoming meeting, with its decision released on Wednesday.
The week will end with the closely watched Employment report for January.
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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Authored by the Investment Research team at Commonwealth Financial Network.
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