Markets Post Fourth Weekly GainSubmitted by Guidant Planning on January 30th, 2018
January 29, 2018–All three major domestic equity averages marked their fourth weekly advance as investors remain upbeat on the economy despite a softer-than-expected preliminary reading of fourth quarter GDP. The 2.6% increase in 4Q GDP (down from 3.2% growth in the 3Q) was dampened primarily because the trade deficit widened, as imports increased at nearly twice the pace of U.S. exports. Wall Street overlooked the disappointment and instead focused on stronger consumer spending, up 3.8% last quarter -the highest quarterly increase in more than a year. Also signaling a solid economic footing going into the New Year, 4Q business investment expanded at the fastest pace in three years. Better-than-expected quarterly earnings continued to power equities higher, as the vast majority of companies offered strong profit outlooks for 2018, fueled in part by U.S. tax cuts. The S&P 500 has risen on 14 of the 18 trading sessions so far this year, the most up days in any January since 1989.
In other key economic news, Congress ended a three-day government shutdown late Monday, with President Trump signing a stop-gap spending bill passed by both the Senate (81-18) and House of Representatives (266-150). It was the first government shut down since 2013, when 800,000 federal workers were furloughed for 16 days. The Chicago Fed said its index of national manufacturing activity increased to +0.27 in December from +0.11 in November, with readings above zero indicating expansion. Existing home sales fell -3.6% in December to 5.570 million annualized, while new home sales sank 9.3% in December, the largest pullback since August 2016. The Conference Board announced its leading economic indicators index rose 0.6% to 107 last month, with the ISM New Orders indicator the largest contributor. The U.S. trade deficit in goods widened by $1.6B to -$71.6B, the largest goods gap since July 2008. Lastly, core prices on personal consumption rose 1.9% during the 4Q from 1.3% the prior quarter and durable goods orders climbed by 2.9% in December.
For the week, the S&P 500 advanced 2.23%, the Dow Industrials gained 2.09% and the Nasdaq Composite jumped 2.31%. Reflecting the synchronized global economic expansion, the MSCI All-Country World Index rose 2.06% last week, extending its 2018 gain to 7.33% and on track for its strongest January rally to date. Within the S&P 500, all 11 of its major sectors posted gains last week, led by Healthcare (+3.54%), Telecom (+3.52%) and Consumer Discretionary (+3.24%). Industrials (+1.17%) and Consumer Staples (+1.16%) rose the least. Large caps stocks continued to outperformed small caps and growth stocks edged out value a second week. WTI crude oil prices surged 4.47% last week, ending at $66.14/barrel, its first closing level above $66 since May 2015. After Treasury Secretary Steven Mnuchin seemingly endorsed the trade benefits of a weak dollar, the U.S. Dollar fell 1.66% for its worst weekly performance since April 2016. Treasury securities were largely unchanged on the week, with the yield on 10-year Treasury notes rising just one basis point to 2.661%.
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Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.
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 S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies.
The Nikkei 225 Stock Average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. The constituents are changed at the beginning of October every year based on an annual review by Nikkei, Inc. The Nikkei average was first published on May 16, 1949, where the average price was ¥176.21 with a divisor of 22.5
The Hang Seng Index is a market capitalization weighted index of the stocks of the 33 largest companies in the Hong Kong market. The Hang Seng Index is a price weighted/share price index which measures movements in the prices of shares, but not of their dividends.
The Shanghai Composite Index is a stock market index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange
The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom
The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB-by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 8.25 years. This total return index, created in 1986 with history backfilled to January 1, 1976, is unhedged and rebalances monthly
The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index 6 holdings has a fluctuating average life of around 6.3 years. This total return unhedged index was created in 1986, with history backfilled to July 1, 1983 and rebalances monthly.
The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Many of the subindicies of the Municipal Index have historical data to January 1980. In addition, several subindicies based on maturity and revenue source have been created, some with inception dates after January 1980, but no later than July 1, 1993. Eligible securities must be rated investment grade (Baa3/BBB-or higher) by Moody’s and S&P and have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 12.8 years. This total return index is unhedged and rebalances monthly
The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.
The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.
The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index. However, between rebalancings, group weightings may fluctuate to levels outside the limits. The index rebalances annually, weighted 2/3 by trading volume and 1/3 by world production.
The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.
The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.
West Texas Intermediate (WTI) is a crude oil stream produced in Texas and southern Oklahoma which serves as a reference or "marker" for pricing a number of other crude streams. WTI is the underlying commodity of the New York Mercantile Exchange's oil futures contracts
The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.
The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000. It has since reached a February 1985 high of 164.720, and has been as low as 70.698 in March 2008.
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