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Weekly Market Snapshot

August 18, 2017

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

The stock market had held up relatively well following increased tensions with North Korea and the weekend developments in Charlottesville. However, President Trump’s response to Charlottesville and the ensuing exodus of CEO support seemed to finally matter. 

There were no major surprises in the FOMC minutes, although (widely under-reported) Fed officials noted that uncertainty about federal policies (healthcare, trade and fiscal issues) may be dampening firms’ spending and hiring plans. There was some debate about whether to announce a date for the start of balance sheet unwinding, but most Fed officials preferred to wait. 

Retail sales rose more than expected in July, with upward revisions to the figures for May and June (still, a lackluster-to-moderate trend). Industrial production rose 0.2%, but only because warmer temperatures boosted the output of utilities. Manufacturing output edged lower, reflecting a 3.6% drop in motor vehicles (take that with a grain of salt – auto output has been choppy in recent months and seasonal adjustment is difficult in July). 

Next week, the focus is expected to be on the Kansas City Fed’s annual monetary policy symposium in Jackson Hole, Wyoming. Homes sales figures (Wednesday, Thursday) are rarely market-movers. Durable goods orders (Friday) are expected to have tanked in July, reflecting a sharp pullback in aircraft orders (which had surged in June). Ex-transportation, orders are expected to be mixed, but generally lackluster to moderate. Financial market participants have been eagerly awaiting Fed Chair Janet Yellen’s appearance (Friday). However, the title of her speech (“financial stability”) suggests that her comments may be more academic and less about current monetary policy (although she may continue to suggest that the Fed’s balance sheet reduction will begin “relatively soon”). Global investors had hoped that ECB President Mario Draghi would signal a major shift in the monetary policy outlook in his Jackson Hole speech, but officials have squashed that rumor.


Indices

  Last Last Week YTD return %
DJIA 21750.73 21844.01 10.06%
NASDAQ 6221.91 6216.87 15.58%
S&P 500 2430.01 2438.21 8.54%
MSCI EAFE 1926.32 1927.41 14.39%
Russell 2000 1358.94 1372.54 0.13%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.25 3.50
Fed Funds 1.16 0.40
30-year mortgage 3.95 3.64

Currencies

  Last 1 year ago
Dollars per British Pound 1.287 1.316
Dollars per Euro 1.172 1.352
Japanese Yen per Dollar 109.57 100.22
Canadian Dollars per Dollar 1.268 1.287
Mexican Peso per Dollar 17.849 18.139

Commodities

  Last 1 year ago
Crude Oil 47.09 48.22
Gold 1292.40 1357.20

Bond Rates

  Last 1 month ago
2-year treasury 1.23 1.35
10-year treasury 2.18 2.24
10-year municipal (TEY) 2.92 4.03

Treasury Yield Curve – 08/18/2017


As of close of business 08/17/2017


S&P Sector Performance (YTD) – 08/18/2017



As of close of business 08/17/2017


Economic Calendar

August 23  —  New Home Sales (July)
August 24  —  Jobless Claims (week ending August 19)
 —  Existing Home Sales (July)
August 25  —  Durable Goods Orders (July)
 —  Yellen Jackson Hole Speech (tentative)
 —  Draghi Jackson Hole Speech
August 29  —  CB Consumer Confidence (August)
August 30  —  ADP Payroll Estimate (August)
 —  Real GDP (2Q17, 2nd estimate)
September 1  —  Employment Report (August)
 —  ISM Manufacturing Index (August)
September 4  —  Labor Day Holiday (markets closed)
September 20  —  FOMC Policy Decision (Yellen press conference)

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business August 18, 2017.

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