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Weekly Market Update December 11, 2017   

Weekly Market Update December 11, 2017   

Weekly Market Update December 11, 2017   

Posted on December 12, 2017 in by Nick Pantle

  General market news

  • The yield on the 10-year Treasury opened this Monday at 2.38 percent, after a volatile week that saw it as high as 2.42 percent and as low as 2.31 percent. The volatility can be attributed largely to the ongoing debate over the tax bill.
  • S. markets remained mixed last week. The Dow Jones continued its lead among the three major indices, posting a gain of 0.46 percent. The S&P 500 followed with a gain of 0.39 percent, but the Nasdaq Composite continued to struggle, losing 0.10 percent as the markets continued to favor value over growth.
  • Both the U.S. and the U.K. reached important deals last week. The U.S. deal temporarily avoided a government shutdown; in two weeks, the House and Senate will try to negotiate a longer-term solution. Overseas, the U.K. and European Union (EU) came to a financial agreement for Brexit, which included discussion of the rights of EU citizens in the U.K. and details regarding the border with Northern Ireland.
  • In other news last week, the International Monetary Fund (IMF) issued a warning regarding a stress test it conducted on Chinese banks, which found that many of them were overextended on the amount of credit issued.
  • Last week’s economic news was positive, with better-than-expected results across the board. On Monday, durable goods orders declined by less than expected. It was even more promising that core orders, which exclude volatile transportation purchases, rose by a healthy 0.9 percent.
  • On Tuesday, the Institute for Supply Management’s Nonmanufacturing index declined slightly to 57.4; however, this still represents a very strong sentiment for the service economy.
  • On Friday, the November employment report came in better than expected, as 228,000 new jobs were added against expectations for 200,000. The underlying data was also positive, as unemployment remained at 4.1 percent and wages continued to grow.


Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 0.39% 0.19% 20.72% 20.45%
Nasdaq Composite –0.10% –0.48% 28.46% 27.75%
DJIA 0.46% 0.30% 26.07% 27.05%
MSCI EAFE 0.10% –0.72% 22.79% 23.55%
MSCI Emerging Markets –0.45% –0.88% 31.71% 29.61%
Russell 2000 –0.97% –1.42% 13.46% 11.22%

Source: Bloomberg


Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market 0.27% 3.34% 3.85%
U.S. Treasury 0.24% 2.24% 2.62%
U.S. Mortgages 0.22% 2.37% 2.61%
Municipal Bond 1.09% 5.49% 5.77%

Source: Morningstar Direct


What to look forward to

This week will be relatively slow, with the release of just a few reports, though they will cover the spectrum of economic activity.


On Wednesday, the Consumer Price Index is expected to show that headline inflation accelerated 0.4 percent in November, up from growth of 0.1 percent in October. This would bring the annual rate from 2 percent to 2.2 percent. Rising energy prices—especially gasoline—are expected to contribute to the increase. The core inflation index, which excludes food and energy, is expected to grow by 0.2 percent in November, leaving the annual figure unchanged at 1.8 percent.


Also on Wednesday, the Federal Reserve (Fed) is expected to raise interest rates at its final meeting of 2017, followed by Chair Yellen’s last press conference. Markets will be watching closely to see what they can learn about next year.


On Thursday, the retail sales report is expected to rise by 0.3 percent in November, up from 0.2 percent in October. This figure may be affected by lower auto sales after the post-hurricane surge. Core sales, which exclude autos, are expected to grow by 0.7 percent in November, up significantly from 0.1 percent in October. The growth should be driven by faster spending in general, as well as by higher gasoline prices.


Finally, on Friday, industrial production is expected to increase by 0.3 percent in November, which is down from 0.9-percent growth in October. The strong October number was due to a rebound from hurricane disruptions in September, so the decline is normal, and the expected growth remains healthy. Manufacturing activity also is expected to decline from 1.3 percent to 0.2 percent, which would also maintain a healthy growth level.


Presented by Masso Torrence


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.