Telemus Weekly Market Review

January 22 – January 26, 2018

Last week Wall Street continued its strong start to 2018, posting gains for the fourth consecutive week. The Nasdaq jumped 2.31%, while the S&P 500 climbed 2.23%, and the Dow Jones Industrial Average advanced 2.09%. The three major indices finished Friday at new all-time highs and now hold year-to-date gains between 7.5% and 8.7%.

The first government shutdown since 2013 lasted just three days, coming to an end when Congress passed a short-term funding bill that will keep the government running until February 8. Republicans, who control the Senate 51 to 49, needed help from Democrats to pass the funding measure, as it requires 60 votes. Democrats resisted at first, forcing the shutdown, but eventually gave in after Republicans promised to soon address the fate of the so-called “Dreamers” undocumented immigrants who were brought to the U.S. as children.

Meanwhile, President Trump made his way to Davos, Switzerland for the World Economic Forum, where he pitched to international companies and investors in a speech on Friday, saying “America is open for business.” He also did an interview with CNBC in Davos, during which he clarified his administration’s stance on the U.S. dollar, saying that he ultimately wants to see a stronger dollar. Earlier in the week, Treasury Secretary Steven Mnuchin said he welcomes a weakening of the dollar as it’s “good for trade.”

The U.S. Dollar Index made sharp moves in reaction to the aforementioned comments, ultimately ending the week lower by 1.6% at 88.92 its lowest level in three years. Currency traders also chewed on the latest policy decisions from the Bank of Japan and the European Central Bank, which crossed the wires on Tuesday and Thursday, respectively. The two central banks voted to leave their policy rates unchanged, as expected, and the ECB reiterated that it intends to leave net asset purchases at the new pace of EUR30 billion per month until the end of September, or beyond, if necessary.

In U.S. corporate news, the fourth quarter earnings season continued this week with around 80 S&P 500 companies delivering their results. Netflix spiked on Tuesday after wowing investors with its subscriber growth and first quarter guidance, while Intel jumped on Friday after reporting better-than-expected earnings and revenues and saying it believes there will be no material impact from the Meltdown and Spectre security concerns first reported at the beginning of the month.

On the downside, Texas Instruments tumbled on Wednesday after its latest earnings report came in as expected, but didn’t impress investors enough to justify the chipmaker’s gain over the prior seven weeks. Airlines also struggled following mixed results from Southwest Air, American Airlines, United Continental, Alaska Air, and JetBlue Airways.

The advance estimate of fourth quarter GDP crossed the wires on Friday, showing a lower-than-expected expansion of 2.6%. The key takeaway from the report is that consumer spending, which accounts for roughly 70.0% of GDP, was alive and well in the fourth quarter, increasing 3.8% the fastest growth rate since the first quarter of 2015. Moreover, business spending also increased, with spending on equipment increasing 11.4% the strongest since the third quarter of 2014.

The Federal Open Market Committee is set to release its latest policy decision this upcoming Wednesday, but the market doesn’t expect the FOMC to make any changes; the CME FedWatch Tool places the chances of a rate hike at 3.6%. The market projects the next hike will occur at the March FOMC meeting with an implied probability of 79.7%. The 10 year U.S. Treasury note closed Friday at 2.66% basically unchanged for the week.

Crude oil ended the week at $66.24 a gain of over 4% for the week. Prices have rallied this year on signs of a tightening global market, as the Organization of the Petroleum Exporting Countries has worked to alleviate a world-wide glut. Further boosting investor optimism, U.S. inventories have fallen to the lowest level since February 2015.

January 29 – February 2 Economic Calendar

  • Monday
  • Personal Income and Outlays
    8:30 AM ET
  • Dallas Fed Mfg Survey
    10:30 AM ET
  • Consumer Confidence
    10:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Chicago PMI
    9:45 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • FOMC Meeting Announcement
    2:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Redbook
    8:55 AM ET

  • S&P Corelogic Case-Shiller HPI
    9:00 AM ET

  • Consumer Confidence
    10:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Chicago PMI
    9:45 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • FOMC Meeting Announcement
    2:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • ADP Employment Report
    8:15 AM ET
  • Employment Cost Index
    8:30 AM ET
  • Treasury Refunding Announcement
    8:30 AM ET
  • Chicago PMI
    9:45 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • FOMC Meeting Announcement
    2:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • Challenger Job-Cut Report
    7:30 AM ET

  • Jobless Claims
    8:30 AM ET
  • Productivity and Costs
    8:30 AM ET
  • PMI Manufacturing Index
    9:45 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • ISM Mfg Index
    10:00 AM ET
  • Construction Spending
    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
  • Employment Situation
    8:30 AM ET

  • Consumer Sentiment
    10:00 AM ET

  • Factory Orders
    10:00 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • John Williams Speaks
    3:30 PM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • FOMC Meeting Announcement
    2:00 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.