Telemus Weekly Market Review

August 28 – September 1, 2017

The stock market moved higher for the second week in a row as investors continued to buy the mid-August dip that pulled the major averages from their all-time highs. The Nasdaq led the way climbing 2.71% to settle the week at a new all-time high. Meanwhile, the Russell 2000, the S&P 500, and the Dow added 2.62%, 1.37%, and 0.80%, respectively.

Eight sectors settled the week in the green—health care, technology, industrials, materials, consumer discretionary, energy, consumer staples, and real estate while three groups finished in the red – financials, utilities and telecom services.

The week’s most notable headlines in chronological order:

  • Monday – Crude futures drop and gasoline futures rise after Hurricane Harvey, which hit the Texas coast over the weekend, forced the closure of many oil refineries. Reports indicate that Apple will hold a product event on September 12, in which the company is expected to unveil its much-anticipated iPhone 8. Gilead Sciences announces that it will acquire Kite Pharmaceuticals for approximately $11.9 billion, or $180.00 per share, in cash.
  • Tuesday – North Korea fires a ballistic missile over the Japanese island of Hokkaido, marking the first time since 2009 that Pyongyang has fired over Japan’s main islands. President Trump says “all options are on the table” in response to North Korea’s latest missile test.
  • Wednesday – Second estimate of second quarter GDP comes in at 3.0% beating estimates. ADP National Employment Report for August comes in better than expected.
  • Thursday – The latest reading of the core PCE Price Index shows that consumer prices decelerated on a year-over-year basis in July–dropping to +1.4% from +1.5% in June. July personal income beats estimates while personal spending falls short.
  • Friday – The Employment Situation Report for August misses estimates; nonfarm payrolls. The ISM Manufacturing Index comes in better than expected. Reports indicate that the White House will not attempt to shut down the government, even if it doesn’t secure funding for a barrier along the U.S.-Mexico border.

Economic data was really the focal point this week as investors received a slew of economic reports–the most notable of which were the Employment Situation Report for August and the core PCE Price Index for July. Both reports helped ease the market’s rate-hike concerns, providing further evidence that inflation has been, and will continue to be, relatively sluggish.

The core PCE Price Index, which excludes food and energy, increased by 0.1% in July, but dropped on a year-over-year basis to +1.4% from +1.5% in June. The Fed has set a year-over-year target of 2.0% for inflation so July’s deceleration doesn’t bode well for the notion that the Fed will be able to follow through with its forecast of one additional rate hike this year.

In addition, the August jobs report provided no signs of a pick up in inflation in the near term as it showed another relatively weak increase in average hourly earnings. On a year-over-year basis, average hourly earnings have risen 2.5%, unchanged from the 12-month period ending in July.

The fed funds futures market currently places the chances of another rate hike this year at 41.4% and considers the June 2018 FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 54.4%. Last week, the market expected the next rate hike to occur in June 2018 with an implied probability of 58.0%. The 10 year U.S. Treasury note closed Friday at 2.17% virtually unchanged for the week.

Looking ahead, the market’s attention will likely shift from rate hikes to the Fed’s balance sheet during the next FOMC meeting, which is scheduled to take place September 19-20, as the U.S. central bank is expected to announce the start of a plan to reduce its massive $4.5 trillion balance sheet.

Crude oil end the week at $47.35 down about 1% from last Friday’s close

September 4 – September 8 Economic Calendar

  • Monday
  • US Holiday: Labor Day

    Markets Closed

  • Factory Orders
    10:00 AM ET
  • TD Ameritrade IMX
    12:30 PM ET
  • Neel Kashkari Speaks
    1:10 PM ET
  • Gallup US ECI
    2:00 PM ET
  • Robert Kaplan Speaks
    7:00 PM ET
  • Loretta Mester Speaks
    12:15 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    7:00 PM ET
  • William Dudley Speaks
    7:00 PM ET
  • Esther George Speaks
    8:15 PM ET
  • Tuesday
  • Lael Brainard Speaks
    7:30 AM ET

  • Factory Orders
    10:00 AM ET
  • TD Ameritrade IMX
    12:30 PM ET
  • Neel Kashkari Speaks
    1:10 PM ET
  • Gallup US ECI
    2:00 PM ET
  • Robert Kaplan Speaks
    7:00 PM ET
  • Loretta Mester Speaks
    12:15 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    7:00 PM ET
  • William Dudley Speaks
    7:00 PM ET
  • Esther George Speaks
    8:15 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • International Trade
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • PMI Services Index
    9:45 AM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • Beige Book
    2:00 PM ET
  • Loretta Mester Speaks
    12:15 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    7:00 PM ET
  • William Dudley Speaks
    7:00 PM ET
  • Esther George Speaks
    8:15 PM ET
  • Thursday
  • Jobless Claims
    8:30 AM ET

  • Productivity and Costs
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Quarterly Services Survey
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • EIA Petroleum Status Report
    11:00 AM ET
  • Loretta Mester Speaks
    12:15 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    7:00 PM ET
  • William Dudley Speaks
    7:00 PM ET
  • Esther George Speaks
    8:15 PM ET
  • Friday
  • Employment Patrick Harker Speaks
    8:45 AM ET

  • Wholesale Trade
    10:00 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Consumer Credit
    3:00 PM ET
  • Gallup US ECI
    2:00 PM ET
  • Robert Kaplan Speaks
    7:00 PM ET
  • Loretta Mester Speaks
    12:15 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    7:00 PM ET
  • William Dudley Speaks
    7:00 PM ET
  • Esther George Speaks
    8:15 PM ET

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. This market commentary is a matter of opinion and is for informational purposes only.  It is not intended as investment advice and does not address or account for individual investor circumstances.  Investment decisions should always be made based on the client’s specific financial needs, goals and objectives, time horizon and risk tolerance.  The statements contained herein are based solely upon the opinions of Telemus Capital, LLC.  All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, but not guaranteed.