Stocks Rally on a Lower-for-Longer Rate OutlookSubmitted by Guidant Planning on July 18th, 2017
July 17, 2017–U.S. stocks advanced Friday, pushing the S&P 500 and Dow Industrials to new all-time highs for the first time in a month, as investors interpreted weak retail sales and inflation data as a sign that interest rates will remain lower for longer. The June consumer price index was unchanged, missing expectations for a 0.1% rise after a 0.1% decline in May. Consumer prices are up 1.6% from a year ago, the smallest 12-month increase since October. Retail sales declined 0.2% last month, below economists’ consensus forecast for a 0.1% increase. S&P 500 valuations are now at their highest levels since the financial crisis, while the VIX Volatility Index ended the week at 9.51, a 24-year low. The week also ended well for technology stocks, with the NASDAQ Composite rebounding for six straight days and ending within nine points of its record high set on June 8.
In other key economic data last week, the government’s monthly Job Openings and Labor Turnover report (JOLTS) showed the number of job openings in the U.S. fell sharply in May as companies hired the most people since 2004. Wholesale goods inventories rose 0.4% in May, topping estimates, while wholesale trade sales fell 0.5%. Producer prices moved only 0.1% higher in June, following an unchanged reading in May. Lastly, the preliminary July reading of consumer sentiment by the University of Michigan came in at a 9-month low of 93.1, below an expectation of 95 and a 95.1 reading in June.
For the week, the S&P 500 advanced 1.42%, its biggest weekly performance since May, the Dow Industrials added 1.04%, its sixth weekly gain in seven, and the NASDAQ Composite surged 2.59%, its best weekly gain this year. A total of 9 of the 11 major sector groups ended higher last week, led by Technology (+3.76%), Energy (+2.09%) and Materials (+2.03%). Consumer Staples (+0.34%) rose the least, while Telecom (-1.02%) and Financials (-0.64%) lagged. West Texas Intermediate (WTI) crude oil jumped 5.2% last week, ending at $46.54/barrel, while gold futures rose from a mid-March low, up 1.3% last week. The U.S. Dollar Index weakened by 0.89% last week, while Treasury prices edged higher. Moving in opposite direction to prices, the yield on 10-year Treasury notes fell 5.2 basis points last week ending at 2.33%.
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The Barclays U.S. Aggregate bond Index is an unmanaged index composed of Barclays Credit government bond index, mortgage backed securities index, and asset backed securities index and is generally representative of the US Bond market.
The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. 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.
The Barclays U.S. Municipal Bond Index is an unmanaged, market-value-weighted index of investment-grade municipal bonds with maturities of one year or more.
The Bloomberg Commodity Index is a broadly diversified index that allows investors to track commodity futures through a single, simple measure. It is composed of futures contracts on physical commodities and is designed to minimize concentration in any one commodity or sector. It currently includes 19 commodity futures in five groups. No one commodity can comprise less than 2% or more than 15% of the index, and no group can represent more than 33% of the index (as of the annual reweightings of the components).
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. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility.
The Citigroup U.S. Economic Surprise Index is a weighted historical standard deviation measure of U.S. economic data surprises of actual data releases versus Bloomberg survey median levels. Calculated daily in a rolling three-month window, when the index is positive the reading suggests that economic releases have on balance [been] beating economists' consensus forecasts. The weights of economic indicators are derived from relative high-frequency spot foreign exchange impacts of 1 standard deviation data surprises. The indices also employ a time decay function to replicate the limited memory of markets.
The CRB Index is a pricing index that measures changes in the price of 22 commodities that are believed to be among the first to react to changes in economic conditions.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.
The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
MSCI Emerging Markets is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.
The NASDAQ 100 Index is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the NASDAQ. No individual listing can have more than a 24% weighting. Launched on February 1, 1985, the index carried a base value of 125.
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 1000 Index comprises the 1,000 largest companies in the U.S. equity market, and is a subset of the Russell 3000 Index. The Russell 1000 is a market capitalization-weighted index, meaning that the largest companies constitute the largest percentages in the index, affecting performance more than the smallest index members. The inception date for the Russell 1000 and 3000 indices was January 1, 1984.
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 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 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 future.
The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI and provides investors with a publicly available benchmark for investment performance in the crude oil market.
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.
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.
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