The markets marched ahead last week with the S&P 500 and the NASDAQ reporting all-time records, albeit just slightly above previous highs.[1] The S&P rose 1.43% over last week, while the NASDAQ was up 2.08%.[2] The Dow gained 1.32%, and the MSCI EAFE gained 0.14% for the week.[3] Volatility subsided as the CBOE Volatility Index, which gauges fear in the market, fell to 9.8 at the end of the week.[4]
A few important economic developments also caught our attention.

Market News for the Week

Strong Corporate Earnings

Corporate earnings remain a bright spot as approximately 75% of S&P 500 companies beat their Q1 earnings estimates. S&P 500 corporate earnings are averaging a 13.9% increase, from Q1 2016 to Q1 2017, the best performance in over 5 years.[5]


First Quarter GDP Revised Upward

The good news is that Q1 Gross Domestic Product (GDP) revised upward from 0.7% to 1.2% growth.[6] However, the economy continues to grow at a less-than-robust rate of approximately 2% on a year-over-year basis, as it has since 2011.[7]

Oil Prices Fall

U.S. crude ended the week at $49.80 after prices fell almost 5% on Thursday following OPEC's announced 9-month extension to limit oil production.[8] Investors remain cautious; U.S. oil production has spiked by over 10% in the last year, keeping oil prices down by offsetting reduced OPEC production.[9]

Softening Housing Sales

New home sales fell 11.4% in April to an annualized rate of 569,000. Median new home prices dropped 3.0% to $309,200, as sales are tracking for only a modest 0.5% gain for the year.[10] April's existing home sales dropped 2.3% in another indication of softening home sales.[11]
 
The Fed's Plan to Tighten Its Balance Sheet

As expected, the Federal Reserve FOMC unveiled a proposal to gradually unwind its $4.5 trillion balance sheet with monthly limits. The process is likely to begin later in the year, though the Fed has not announced a specific date.[12]

Heading Into Summer

After Memorial Day, the shortened workweek brings more attention-worthy reports as investors will continue to evaluate the prospects for a stronger Q2 GDP performance. Tuesday's April consumer spending reports and Friday's trade data should give us a better picture of where Q2 GDP is heading.[13]

Investors will continue to monitor the U.S. trade gap. April exports were down 0.9% while imports were up 0.7%, creating an unfavorable gap of $67.6 billion. Investment in new equipment will also provide investors with another important indicator of future economic growth. New equipment orders have so far remained flat for the year, though. Finally, the Fed's plans for a possible interest rate hike in June will be on investors' radar.[14]

If you have questions about where you stand today or how to prepare for tomorrow, we are here to talk. Our goal is to give you the facts and insight you need to remain informed and in control of your financial future.

ECONOMIC CALENDAR

  • Monday: Closed
  • Tuesday: Consumer Confidence
  • Wednesday: Motor Vehicle Sales, Pending Home Sales
  • Thursday: ADP Employment Report, Construction Spending, PMI Manufacturing Index
  • Friday: Employment Situation

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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.

Gross Domestic Product (GDP) is a measure of output from U.S. factories and related consumption in the U.S.  It does not include products made by U.S. companies in foreign markets.
 
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.
 
In accordance with its Statute, the mission of the Organization of the Petroleum Exporting Countries (OPEC) is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.

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[1]  http://www.cnbc.com/2017/05/26/us-markets.html

[2] 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=@CCO

[3] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US

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

[4] http://www.cnbc.com/quotes/?symbol=.VIX

[5] http://www.cnbc.com/2017/05/26/disappointing-us-economy-keeps-coming-up-short.html?_source=newsletter%7Ceveningbrief

[6] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477651&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[7] http://www.cnbc.com/2017/05/26/disappointing-us-economy-keeps-coming-up-short.html?__source=newsletter%7Ceveningbrief

[8] http://www.cnbc.com/2017/05/25/oil-remains-weak-after-opec-led-output-cut-extension-falls-below-expectations.html

[9] http://www.cnbc.com/2017/05/24/oil-prices-rise-in-anticipation-of-extended-opec-led-production-cut.html?__source=newsletter%7Ceveningbrief

[10] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477960&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[11] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477936&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[12] http://www.cnbc.com/2017/05/24/fed-sets-process-to-unravel-4-point-5-trillion-balance-sheet.html?__source=newsletter%7Ceveningbrief

[13] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=481883&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[14] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=481883&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top