Last Week: The Dow Jones Industrial Average broke below 21,000 last week, falling (-0.4%) o 8 of 30 Dow stocks advanced for the week o The biggest gain came from Apple (yet again!) which rose +5.2%. Exxon rose +1.3%, while the other six risers were each up less than 1.0% o General Electric was the biggest loser, falling (-4.4%). Cisco, IBM, Disney, and Intel all fell (-2.0%) or more last week Dow Information Technology outperformed the broader Dow, rising +0.5% Dow Materials (-2.0%) and Telecomm Services (-1.4%) underperformed The S&P 500 fell (-0.3)% o Nvidia led gainers, up +22.8%. Other strong performers included Electronic Arts +13.8% and Newell Brands +13.7% o The index s biggest losers featured some well-known retail names, including Macy s (-18.2%) and Nordstrom (-15.6%) Mid Cap underperformed large and small o The S&P 100 fell (-0.3)%, while the S&P Mid Cap 400 fell (-1.1%) The tech-laden NASDAQ was again a strong performer, rising +0.4% Growth outperformed value o The Russell 1000 Growth index was flat last week, while the Russell 1000 Value index fell (-0.7%) The VIX volatility index (shown below) hit its lowest level in 24 years. As an example of the complacency in the market, the Dow Industrials has had only four moves of 1% or more in either direction this year, the fewest since 1965 according to Barron s this weekend Source: Bloomberg
Volatility in asset classes other than stocks also has been muted According to Jefferies, the S&P 500 traded within a 1% range for the 13 days ended May 11, the least volatile 13 days in market history Bloomberg s Commodity Index tapped a low on May 9, reflecting a rout in copper, nickel, oil, and other commodity prices. But the week witnessed strong rebounds thereafter o Crude oil finished up +3.5% o Natural gas rose +4.9% o Gold was flat o Silver bounced +1.1% On Monday, Apple became the first company to achieve an $800 billion market value In its inaugural quarter as a publicly traded company, Snap reported results that fell shy of consensus forecasts, posting a $2.2 billion loss for the quarter; its stock promptly dove -21% in response. The stock is re-approaching its IPO price According to Bloomberg, Sprint and Tmobile have engaged in preliminary merger discussions China s stock market snapped an eight-day losing streak Thursday, its longest since 2013 o Shanghai s Composite index fell (-0.6)% for the week o Korea s KOSPI fell (-0.3%) and Japan s Nikkei was nearly flat at (-0.1%) Major European markets continued their strength last week
o UK was the strongest, up +2.0%. o France rose +0.5% and Germany was up +0.6% For the week, 10-year Treasury yields fell 2 basis points to 2.33% It was politics as usual last week in Washington o President Trump fired FBI Director James Comey. Republican Senator John McCain said: This is a centipede. I guarantee you there will be more shoes to drop o The Senate confirmed President Trump s nominee for U.S. Trade Representative, Robert Lighthizer, in an 82-14 vote. Retail sales rose 0.4% sequentially in April (just below the 0.5% consensus guess) and 4.5% year-over-year, while March figures got revised from an originally reported -0.2% to +0.1% (another reminder not to read too much into the originally reported data!) The Consumer Price Index rose 0.2% in April, led by higher Energy prices. Core CPI, which excludes volatile food and energy prices, ticked up 0.1%. Consensus had anticipated a 0.2% increase in both gauges The University of Michigan s Consumer Sentiment index edged up to 97.7 in the preliminary May reading, from 97.0 in the final April report, and above the 97.2 consensus estimate Continuing claims for unemployment reached their lowest level since 1988 and the second-lowest level in 37 years Source: Bespoke Research
This Week: Markets in Asia were down overnight: o The Nikkei closed down (-0.1%) European markets were mixed in early trading: o The FTSE is up +0.1% o The CAC 40 declined (-0.1%), while the Euro Stoxx 50 fell the (-0.2%) o The Dax was (-0.1%) o Global markets are taking a breather but have benefitted year-to-date due to improving sales and earnings trends U.S. markets are fractionally higher: o The S&P500 and the Dow Jones Industrial futures are both up 0.3% in early trading o Gold is up +0.6% to $1,235/ounce o West Texas crude is up +3.4% to approximately $49/barrel Saudi Arabian and Russian energy ministers have stated they are in favor of extending a production cut deal to 2018 o Natural gas is down at $3.37/MMBtu o The 10-year Treasury yield is 2.34%, essentially flat M&A activity: o Thermo Fisher is buying Patheon in a $5.2 billion transaction o Moody s is acquiring Bureau van Dijk for $3.3 billion o Owens Corning announced a small transaction to acquire Pittsburgh Corning IPO news: o G1 Therapeutics is expected to price its IPO on Tuesday Quarterly earnings season continues this week with the following select companies in the S&P 500 reporting: o Tuesday: Home Depot, TJ Maxx o Wednesday: Target, Cisco o Thursday: Wal Mart, Ralph Lauren
o Friday: Deere & Co. Economic data reports: o Housing starts data will be released for the U.S. on Tuesday, estimates are for 1.3 million at a seasonally adjusted annual rate versus 1.2 million last month o The Philly Fed General Business Activity Index will be released on Thursday with an estimate of 10 The focus will continue to be on the improved economic trends in Europe such as recent sentiment data Source: Strategas As German elections come into focus, trends are favoring the mainstream candidates on the heels of recent results in France Source: Strategas
Notwithstanding today s jump in the commodity, oil has been under pressure as the market anticipates the upcoming OPEC meeting next week Source: Strategas U.S. 10 year yields remain in focus as a gauge of economic growth prospects Source: dshort
In the continued active/passive discussion, Bloomberg notes there are now more benchmarks and ETFs than stocks in the market. What happens when there are more benchmarks than the stocks that comprise the benchmarks? Source: Bloomberg As always, thanks very much for your interest and support. Colin Ducharme, CFA Executive Director Chip Wittmann, CFA Executive Director
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