Telemus Weekly Market Review

November 20 – November 24, 2017

A festive mood struck Wall Street this week and it translated into further gains for the major indices, culminating in new record highs for the S&P 500 and Nasdaq Composite and leaving the Dow within striking distance. The Nasdaq Composite led the way with a 1.57% gain that was anchored by Apple, Amazon, Facebook, Alphabet, Netflix, and Microsoft, as well as ongoing strength in the semiconductor stocks. The Dow, up 0.86% and the S&P, advancing 0.91%, also enjoyed strong gains for the week.

The Philadelphia Semiconductor Index jumped 2.7% for the week, underpinned by M&A activity that featured Marvell Technology bidding to acquire Cavium and reports suggesting Broadcom might return next week with a higher offer to acquire Qualcomm after the company rejected its $70 per share cash-and-stock offer.

The broader market was carried along by an embrace of the seasonality trade, as participants embraced the notion that Thanksgiving week is often accented with a positive bias, which there was no denying this time around. The seasonality factor hit home in earnest on Tuesday when the major indices logged gains between 0.7% and 1.1% despite the Department of Justice filing a lawsuit to block the AT&T – Time Warner merger and a lack of any clear-cut news to explain the unmitigated bullish bias. That bullish bias took the S&P 500 above 2600 for the first time ever, squeezing short sellers and feeding a fear of missing out for sidelined participants.

There was only a slight retracement on Wednesday when the S&P 500 dropped two points despite an acknowledgment in the minutes for the October 31-November 1 Federal Open Market Committee meeting that “…several participants expressed concerns about a potential buildup of financial imbalances” given elevated asset valuations and low financial market volatility.

Those concerns could come home to roost at another time, but this week wasn’t governed by any unsettling concerns. The market traded up, and through, reports that talks in Germany to form a coalition government had failed; it traded up, and through, Fed Chair Yellen’s announcement that she will be resigning from the Board of Governors upon the swearing in of Jerome Powell as Fed Chairman; and the stock market traded up, and through, another week in which a curve-flattening trade persisted in the Treasury market.

There wasn’t much important economic data this week, although the few reports that there were generally surprised on the upside. The Leading Economic Index, Existing Home Sales, and University of Michigan Consumer Sentiment reports were all better than expected. The Durable Goods Orders report for October was weaker than expected, yet the disappointment over that headline was mitigated by the understanding that the weakness was driven by volatile aircraft orders. Excluding transportation, durable goods orders rose on the heels of an upwardly revised increase for September.

The coming week will feature a longer lineup of economic data, including the New Home Sales (Monday), Consumer Confidence (Tuesday), revised Q3 GDP (Wednesday), Personal Income and Spending (Thursday), ISM Index (Friday), and Auto Sales (Friday) reports.

That data will be competing for market participants’ attention along with the confirmation hearing for Jerome Powell (Tuesday), Fed Chair Janet Yellen’s economic outlook testimony before the Joint Economic Committee (Wednesday), the meeting between OPEC members and Russia to discuss extending production cuts (Thursday), and the expected vote on the Senate’s tax bill (Thursday).
The 10-year U.S. Treasury note closed Friday at 2.34% basically unchanged for the week. The spread between the 2-yr note yield and the 10-yr note yield narrowed to 60 basis points from 63 basis points a week ago and 125 basis points when the year began. A narrowing spread often piques concerns as being a harbinger of a slowdown in economic growth.

Crude oil closed Friday at $58.97 in NYMEX trading, a gain of almost 4% for the week and its highest close since the summer of 2015.

January 25-29 What To Look For

  • Monday
  • New Home Sales
    10:00 AM ET
  • Dallas Fed Mfg Survey
    10:30 AM ET
  • Neel Kashkari Speaks
    6:30 PM ET
  • William Dudley Speaks
    7:00 PM ET
  • William Dudley Speaks
    9:15 AM ET
  • Consumer Confidence
    10:00 AM ET
  • Jerome Powell Speaks
    10:00 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • State Street Investor Confidence Index
    10:00 AM ET
  • Gallup US ECI
    2:00 PM ET
  • Tuesday
  • International Trade in Goods
    8:30 AM ET

  • Redbook
    8:55 AM ET
  • FHFA House Price Index
    9:00 AM ET
  • S&P Corelogic Case-Shiller HPI
    9:00 AM ET
  • William Dudley Speaks
    9:15 AM ET
  • Consumer Confidence
    10:00 AM ET
  • Jerome Powell Speaks
    10:00 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • State Street Investor Confidence Index
    10:00 AM ET
  • Gallup US ECI
    2:00 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • GDP
    8:30 AM ET
  • William Dudley Speaks
    8:30 AM ET
  • Corporate Profits
    8:30 AM ET

  • Janet Yellen Speaks
    10:00 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • John Williams Speaks
    1:50 PM ET
  • Beige Book
    2:00 PM ET
  • Gallup US ECI
    2:00 PM ET
  • Thursday
  • Jobless Claims
    8:30 AM ET

  • Personal Income and Outlays
    8:30 AM ET
  • Chicago PMI
    9:45 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET

  • EIA Natural Gas Report
    10:30 AM ET
  • Robert Kaplan Speaks
    1:00 PM ET
  • Farm Prices
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Gallup US ECI
    2:00 PM ET
  • Friday
  • James Bullard Speaks
    9:05 AM ET

  • Robert Kaplan Speaks
    9:30 AM ET
  • PMI Manufacturing Index
    9:45 AM ET
  • ISM Mfg Index
    10:00 AM ET
  • Construction Spending
    10:00 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET

  • Jerome Powell Speaks
    10:00 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • State Street Investor Confidence Index
    10:00 AM ET
  • Gallup US ECI
    2:00 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.