Stocks Slip for Second Week

Last week, major indexes experienced losses for the second week in a row, with the S&P 500 falling 1.21%, the Dow giving back 1.01%, the NASDAQ dropping 1.26%, and the MSCI EAFE declining 0.14%.[1] 

 

Markets closed on April 14th for the Good Friday holiday, but in the four trading days a number of headlines dominated the news cycles:

  • International tensions surrounding Syria and North Korea continued to heighten.[2] 
  • The U.S. dropped its biggest non-nuclear bomb in Afghanistan.[3] 
  • United Airlines lost $250 million in market value on Tuesday after footage emerged of a passenger's violent removal from an overbooked flight.[4] 

These headlines drew great attention last week, and we will continue to follow events as they develop. Meanwhile, we want to focus on newly released data from last week that gives perspectives on where the economy is today and what we should watch for in the coming months. In a nutshell, the reports hinted at relatively slow growth in the first quarter of 2017.[5] 

Inflation and Spending Dropped

  • The producer price index, which measures price changes for producers of goods and services, missed expectations and fell 0.1% in March.[6] 
  • The consumer price index, which measures price changes in a group of goods and services consumers purchase, fell 0.3%, much more than predicted.[7]  
  • Retail sales declined 0.2% in March, the second monthly drop in a row.[8] 

Consumer Sentiment and Jobless Claims Were Positive

  • The April Consumer Sentiment Index readings beat expectations, revealing people's assessment of current economic conditions being at the highest point since 2000.[9] 
  • Jobless claims came in well below expectations to show fewer people filing first-time unemployment claims, indicating a strong labor market.[10]

Analyzed together, this new data could indicate that the Federal Reserve will be less likely to raise rates in June.[11] However, we still have two more months of data and market performance until that meeting, and much can change in that time. Consumer spending accounts for approximately 70% of the total economy. Thus, high consumer sentiment and a tightening labor market -- coupled with delayed income-tax returns --could help the economy pick up in the coming months.[12]

Right now, we are in the thick of quarterly earnings season. Last Thursday, we saw J.P. Morgan Chase and Citigroup exceed their earnings estimates and still lose value in their shares that day.[13] Determining whether this investor response is industry specific or indicative of other sentiment changes will be a key detail to examine in the coming weeks. The forthcoming reports will give key insights into the health of corporate America and the market's reaction to the companies' performance.

We will continue to watch political and market developments and how they affect our overall economy. In the meantime, we encourage you to keep a focus on your long-term goals and the strategies that can help support your financial life. 

ECONOMIC CALENDAR

  • Monday: Housing Market Index
  • Tuesday: Housing Starts, Industrial Production
  • Wednesday: Beige Book
  • Friday: Existing Home Sales

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. 

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia. 

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.

Consumer Price Index (CPI) measures prices of a fixed basket of goods bought by a typical consumer, widely used as a cost-of-living benchmark, and uses January 1982 as the base year.

The Producer Price index (PPI) is a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.msci.com/end-of-day-data-search

[2] http://www.cnbc.com/2017/04/11/concerns-about-north-korea-and-syria-keep-a-lid-on-wall-street.html 

[3] http://www.cnn.com/2017/04/14/world/moab-bomb-things-to-know/

[4] http://money.cnn.com/2017/04/11/investing/united-airlines-stock-passenger-flight-video/index.html?iid=EL

[5]  http://www.reuters.com/article/us-usa-economy-idUSKBN17G0ZW 

[6] https://www.bls.gov/news.release/ppi.nr0.htm 

[7] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477393&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[8] http://www.reuters.com/article/us-usa-economy-idUSKBN17G0ZW 

[9]  http://www.cnbc.com/2017/03/17/consumer-sentiment-hits-976-in-march-vs-97-estimate.html

[10] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477441&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[11] https://www.bloomberg.com/news/articles/2017-04-14/falling-inflation-retail-sales-bolster-fed-s-go-slow-approach 

[12] https://www.bloomberg.com/news/articles/2017-04-14/falling-inflation-retail-sales-bolster-fed-s-go-slow-approach 

[13] http://www.cnbc.com/2017/04/13/despite-positive-earnings-bank-stocks-turn-negative.html 

Special Quarterly Update: Stocks Post Strong Gains in Q1

The first quarter of 2017 is now behind us, and, although we won't have complete economic data for a while, we do know that domestic stocks had a solid start to the year. Last week, major indexes took a pause from some recent gains and began the second quarter of 2017 with less than thrilling performance. The S&P 500 lost 0.30%; the Dow was down 0.03%; the NASDAQ gave back 0.57%; and the MSCI EAFE declined 0.72%.[1] For this week's update, we're going to examine what happened to markets in the first quarter. 

How did markets perform in Q1?

All three major domestic indexes posted sizable gains in the first three months of 2017:[2]

  • S&P 500 up 5.5%
  • Dow up 4.6%
  • NASDAQ up 9.8%

As we mentioned last week, the NASDAQ's nearly double-digit growth represented its best quarter since 2013.[3] 

However, the majority of the markets' gains happened in January and February.[4] While the NASDAQ increased 1.48% in March, the S&P 500 stayed flat and the Dow lost 0.72% in the same period.[5] 

Which stocks outperformed in Q1?

Large cap stocks -- companies with more than $5 billion in market capitalization -- drove much of the growth we saw last quarter.[6] Tech stocks performed especially well, gaining more than 12% over the quarter.[7] In fact, S&P Info Tech, which tracks information technology stocks in the S&P 500, was the quarter's highest performing sector index.[8]

How did politics affect market performance in Q1?

As the new presidential administration came to power last quarter, investors closely followed policy news and headlines. We encourage you to pay more attention to economic fundamentals than media reports, but we understand that completely ignoring political conversations would have been challenging in Q1.   

Overall, investor expectations for the new administration's pro-growth policies helped push the markets to numerous record highs last quarter.[9] However, when Congress chose not to vote on the American Health Care Act, market concerns increased about whether new policy changes would actually occur.[10] The Dow lost 317 points the week of the expected -- but cancelled -- healthcare vote.[11] 

How high was volatility in Q1?

Even though policy debates have seemed to heighten the emotional landscape this year, the VIX measure of volatility recorded its lowest Q1 average ever.[12] The 11.69 level is also the second lowest quarterly average since 1990.[13] 

What might be on the horizon?

Earnings season is upon us, and investors will be watching to see whether reports match expectations. According to FactSet, the S&P 500's estimated earnings growth rate for Q1 2017 is 8.9%, which would be its best year-over-year earnings growth since 2013.[14] Only a handful of S&P 500 companies have reported their earnings so far; of these reports, 57% exceeded the mean sales estimate, and 74% exceeded the mean earnings-per-share estimate.[15] 

In addition to earnings, the Federal Reserve's interest-rate decisions will be on many people's minds throughout 2017. After raising rates on March 15, the Fed expects at least two more increases this year.[16] So far, the markets absorbed these increases well, with the Dow even gaining 100 points on the Fed's last meeting day.[17] 

Ultimately, we have many data points, policy updates, and economic indicators to focus on in the coming months. As of now, 2017 has started with strong market performance, high consumer confidence, and low volatility.[18] 

ECONOMIC CALENDAR

  • Tuesday: JOLTS
  • Wednesday: Import and Export Prices, EIA Petroleum Status Report
  • Thursday: PPI-FD, Consumer Sentiment
  • Friday: Consumer Price Index, Retail Sales, Business Inventories

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. 

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia. 

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.

The S&P 500® Information Technology Index comprises those companies included in the S&P 500 that are classified as members of the GICS® information technology sector. The Global Industry Classification Standard (GICS) is an industry taxonomy developed in 1999 by MSCI and Standard & Poors (S&P) for use by the global financial community. The GICS structure consists of 11 sectors, 24 industry groups, 68 industries, and 157 sub-industries into which S&P has categorized all major public companies.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

[1]  http://finance.yahoo.com/quote/%5EGSPC/history?period1=1490932800&period2=1491537600&interval=1d&filter=history&frequency=1d

http://finance.yahoo.com/quote/%5EDJI/history?period1=1490932800&period2=1491537600&interval=1d&filter=history&frequency=1d 

http://finance.yahoo.com/quote/%5EIXIC/history?period1=1490932800&period2=1491537600&interval=1d&filter=history&frequency=1d 

https://www.msci.com/end-of-day-data-search

[2] http://business.nasdaq.com/marketinsite/2017/MID-April/MID-Special-Update-First-Quarter-2017-Review-Look-Ahead.html 

[3] http://www.cnbc.com/2017/03/31/us-markets.html 

[4] http://www.cnbc.com/2017/03/31/us-markets.html 

[5]  http://www.cnbc.com/2017/02/17/us-markets.html

http://www.cnbc.com/2017/03/31/us-markets.html

[6] http://www.investopedia.com/terms/l/large-cap.asp 

http://business.nasdaq.com/marketinsite/2017/MID-April/MID-Special-Update-First-Quarter-2017-Review-Look-Ahead.html 

[7] http://www.cnbc.com/2017/03/31/us-markets.html

[8] http://business.nasdaq.com/marketinsite/2017/MID-April/MID-Special-Update-First-Quarter-2017-Review-Look-Ahead.html 

[9] http://www.cnbc.com/2017/03/31/us-markets.html

[10] https://www.zacks.com/stock/news/255250/apple-amp-these-3-stocks-were-best-performers-of-q1 

[11] http://business.nasdaq.com/marketinsite/2017/MID-April/MID-Special-Update-First-Quarter-2017-Review-Look-Ahead.html

[12] http://www.zerohedge.com/news/2017-04-03/goldman-warns-risk-underpriced-amid-lowest-q1-vix-level-record 

[13] http://www.zerohedge.com/news/2017-04-03/goldman-warns-risk-underpriced-amid-lowest-q1-vix-level-record

[14] https://insight.factset.com/hubfs/Resources/Research%20Desk/Earnings%20Insight/EarningsInsight_040717.pdf

[15] https://insight.factset.com/hubfs/Resources/Research%20Desk/Earnings%20Insight/EarningsInsight_040717.pdf 

[16] https://www.nytimes.com/2017/03/15/business/economy/fed-interest-rates-yellen.html?_r=0 

[17] http://business.nasdaq.com/marketinsite/2017/MID-April/MID-Special-Update-First-Quarter-2017-Review-Look-Ahead.html 

[18] http://finance.yahoo.com/news/comes-consumer-confidence-133841167.html