Telemus Weekly Market Review

December 4 – December 8, 2017

Stocks worked their way higher last week as investors geared up for a potential end-of-year showdown in Washington. The S&P 500 gained 0.35% and the Dow Jones Industrial Average advanced 0.40%, both closing Friday’s session at fresh record highs, while the tech-heavy Nasdaq underperformed, losing 0.11% for the week. Small caps also struggled, with the Russell 2000 lower by 1.0% for the week.

Investors were upbeat going into Monday’s opening bell after the U.S. Senate passed its version of a tax reform bill over the weekend, allowing the GOP to enter the final stretch of its quest to rewrite the tax code. House and Senate Republicans are hoping to reach an agreement on a final bill and pass said bill in their respective chambers before December 22nd.

In addition to the GOP’s self-imposed tax reform deadline, December 22nd is the new end date for government funding after Congress agreed to a two-week stopgap spending bill on Thursday evening. The risk of a government shutdown was on investors’ minds throughout the week, helping to keep the bulls in check.

With the legislative agenda for the rest of the year virtually set, investors appeared to be in wait-and-see mode for much of the rest of the week, taking some profits and readjusting their portfolios. However, the Employment Situation Report for November, which was released on Friday, helped equities finish the week on a positive note after showing a larger-than-expected increase in nonfarm payrolls and a smaller-than-expected rise in average hourly earnings.

In other words, job growth has remained strong while wages–which are positively correlated with inflation–have remained relatively subdued. This combination has proven to be highly beneficial for the stock market as it points to steady economic growth but leaves out the inflationary concerns that typically accompany said growth.

The S&P 500’s eleven sectors finished the week mixed, with seven settling in the green and four closing in the red. The financial sector was the top performer, adding 1.50%, followed closely by the industrial group, up 1.40%. Within the industrial space, transports showed particular strength, pushing the Dow Jones Transportation Average higher by 2.10% for the week.

On the downside, the energy sector lost 0.70% amid a decrease in the price of crude oil; West Texas Intermediate crude futures declined 1.80% to $57.30 per barrel. The utilities space also struggled as energy providers like Edison International, whose shares lost 11.10% for the week, faced outages due to wild fires in Southern California.

Corporate news was pretty light last week, but it’s worth noting that CVS Health acquired health insurer Aetna for $207 per share in cash and stock. That price represents a premium of about 29% to where Aetna shares were trading before the Wall Street Journal reported that the companies were in talks in October.

Looking ahead, the Fed is widely expected to announce a rate hike of 25 basis points this week, which would bring the fed funds target range to 1.25%-1.50%. The 10 year U.S. Treasury note ended Friday at 2.38% just slightly above last weeks closing yield.

December 11 – December 15 Economic Calendar

  • Monday
  • JOLTS
    10:00 AM ET
  • NFIB Small Business Optimism Index
    6:00 AM ET
  • PPI-FD
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Treasury Budget
    2:00 PM ET
  • Fed Chair Press Conference
    2:30 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • FOMC Meeting Begins
  • NFIB Small Business Optimism Index
    6:00 AM ET
  • PPI-FD
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Treasury Budget
    2:00 PM ET
  • Fed Chair Press Conference
    2:30 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • Consumer Price Index
    8:30 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • FOMC Meeting Announcement
    2:00 PM ET
  • FOMC Forecasts
    2:00 PM ET
  • Fed Chair Press Conference
    2:30 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • Jobless Claims
    8:30 AM ET

  • Retail Sales
    8:30 AM ET
  • Import and Export Prices
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Business Inventories
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • Quadruple Witching

  • Empire State Mfg Survey
    8:30 AM ET
  • Industrial Production
    9:15 AM ET
  • Atlanta Fed Business Inflation Expectations
    10:00 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Treasury International Capital
    4:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 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.