Telemus Weekly Market Review

June 12 – June 16, 2017

The stock market was fairly flat this week as measured by the S&P 500 as investors digested a host of headlines, most notable the FOMC’s latest rate-hike decision on Wednesday. The S&P 500 registered three losses and a new record high this week, eventually settling with a very small gain of 0.06%. The Dow was up 0.53% for the week and the Nasdaq fell 0.90% on continued selling of tech stocks.

After plunging nearly 3.0% last Friday, the top-weighted technology sector registered another notable decline in the first session of the week, losing 0.8%, as mega-cap names like Apple, Microsoft, Alphabet, and Facebook weighed. Amazon also underperformed, but the consumer discretionary sector, like the S&P 500, was able to escape with just a slim loss.

The tide turned in the bulls’ favor on Tuesday as the aforementioned companies bounced back from their two-day declines. The technology and consumer discretionary sectors led the advance, pushing both the benchmark index and the Dow to new record highs. However, the S&P 500’s gain was capped at 0.5% as investors approached Wednesday’s FOMC rate decision with caution.

As expected, the FOMC on Wednesday voted to raise the fed funds target range by 25 basis points to 1.00%-1.25%. The vote was nearly unanimous with Minneapolis Fed President Neel Kashkari being the lone dissenter. In addition, the Fed laid out a specific plan for how it will start to normalize its balance sheet and revealed that the median FOMC member expects one additional rate hike in 2017.

The Treasury market held a big gain going into the decision, underpinned by weak CPI and retail sales readings for May, but gave back a portion of that advance after the announcement. However, in the equity market, the S&P 500 hardly deviated from its unchanged mark as investors continued to digest the Fed’s policy decision.

Equity indices opened solidly lower on Thursday as the market continued to debate whether the Fed might be tightening policy too much and/or too fast. In addition, sentiment was dampened by a Washington Post report that claimed Special Counsel Mueller’s investigation of Russia’s interference in the U.S. election is broadening in scope to examine whether President Trump tried to obstruct justice.

The technology and consumer discretionary sectors showed relative weakness, yet again, on Thursday morning. However, the two groups were able to reclaim a good portion of their losses as the day went on. A positive performance from the industrial sector, led by names like Caterpillar, General Electric, and Boeing, helped keep the S&P 500’s loss in check.

On Friday, Amazon dominated the headlines after announcing that it plans to acquire Whole Foods Market for $42 per share in cash. Big-box retailers like Wal-Mart, Costco, and Target and supermarket stocks like Kroger plunged on the news, sending the consumer staples sector to the bottom of the day’s leaderboard. However, the S&P 500 still managed to eke out a slim victory.

It’s also worth pointing out that WTI crude settled the week with a loss of 2.4% following a bearish EIA inventory report on Wednesday, which showed a smaller than expected draw of 1.7 million barrels in crude stocks and a build of 2.1 million barrels in gasoline inventories for the week ended May 9. The tumble left oil at $44.68 a barrel, its worst level since early November.

Despite the Fed’s call for a third rate hike in 2017, the fed funds futures market points to the March 2018 FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 50.8%, down from last week’s 60.7%. The implied probability of a December rate hike sits at 43.4%, down from last week’s 51.7%. The 10 year U.S. Treasury closed Friday at 2.15%.

June 19 – June 23 Economic Calendar

  • Monday
  • William Dudley Speaks
    8:00 AM ET
  • Charles Evans Speaks
    7:00 PM ET
  • Current Account
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Robert Kaplan Speaks
    3:00 PM E
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • FOMC Meeting Stanley Fischer Speaks
    3:15 AM ET

  • Eric Rosengren Speaks
    8:15 AM ET
  • Current Account
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Robert Kaplan Speaks
    3:00 PM E
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • Existing Home Sales
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Redbook
    8:55 AM ET
  • Robert Kaplan Speaks
    3:00 PM E
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • Jobless Claims
    8:30 AM ET

  • FHFA House Price Index
    9:00 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Leading Indicators
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • PMI Composite Flash
    9:45 AM ET

  • New Home Sales
    10:00 AM ET
  • James Bullard Speaks
    11:15 AM ET
  • Loretta Mester Speaks
    12:40 PM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Jerome Powell Speaks
    2:15 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.