Telemus Weekly Market Review

October 2 – October 6, 2017

Stocks started October where they left off, climbing to new record highs once again, despite the devastating shooting that took place in Las Vegas on Sunday evening. The major indices all settled the week in the green with the Dow, the Nasdaq, and the S&P 500 adding 1.65%, 1.45%, and 1.19%, respectively.

This week’s bullish bias had its roots in last week’s run to record highs, which was sparked by the release of the GOP’s latest tax reform outline. The House kept the ball rolling this week by passing a budget that slashes government spending in anticipation of decreased tax revenue. The GOP still has a long way to go, but the market liked the progress.

Excited by the idea of a tax overhaul, the S&P 500’s financial sector climbed 1.9% this week to finish comfortably ahead of the broader market. The financial sector has added 10.6% since closing at a three month low on September 7 and now trades just a tick behind the benchmark index for the year.

Automakers were strong this week after reporting largely solid U.S. sales figures for the month of September, which were helped by the replacement of vehicles lost to Hurricane Harvey and Hurricane Irma. General Motors showed particular strength, climbing 11.3%, after reporting a year-over-year increase of 12.0%.

Netflix also had a good showing, hitting a fresh all-time high, after UBS raised its target price to $225 from $190 and following news that the company will raise the price of its standard and premium video-streaming services. NFLX shares settled with a gain of 9.2% for the week.

It’s also worth pointing out that the CBOE Volatility Index (VIX) settled at an all-time low of 9.19 on Thursday, signaling the market’s belief that volatility will remain subdued in the short term. The previous record low of 9.31 was recorded nearly 24 years ago in December 1993.

Equities ended the week on a down note, however, following a noisy Employment Situation Report for September that showed the first loss in jobs since 2010. The market took the report with a grain of salt since it was tainted by the impacts of Hurricane Harvey and Hurricane Irma, but it didn’t do much to alleviate rate-hike concerns nonetheless, showing an increase of 0.5% in average hourly earnings.

As a reminder, average hourly earnings growth, which is positively correlated with inflation, has been tepid in recent months, putting the Fed’s rate-hike forecast into question. However, following Friday’s jobs report, the market now strongly believes the U.S. central bank will hike rates one more time this year, thereby achieving its goal of three rate hikes in 2017.

The fed funds futures market places the chances of a December rate hike at 93.1%, up from last week’s 77.9%. The 10 year U.S. Treasury note finished the week at 2.36% as yields ticked up slightly on the week.
Crude oil closed at $49.25 on Friday, down almost 5% for the week.

October 2 – October 7 Economic Calendar

  • Monday
  • US Holiday: Columbus Day
  • Banks Closed, Markets Open
  • Neel Kashkari Speaks
    10:00 AM ET
  • Rob Kaplan Speaks
    8:00 PM ET
  • Jerome Powell Speaks
    10:30 AM ET
  • EIA Petroleum Status Report
    11:00 AM ET
  • Treasury Budget
    2:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    9:15 PM ET
  • Tuesday
  • NFIB Small Business Optimism Index
    6:00 AM ET
  • Redbook
    8:55 AM ET
  • Neel Kashkari Speaks
    10:00 AM ET
  • Rob Kaplan Speaks
    8:00 PM ET
  • Jerome Powell Speaks
    10:30 AM ET
  • EIA Petroleum Status Report
    11:00 AM ET
  • Treasury Budget
    2:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    9:15 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • Charles Evans Speaks
    7:15 AM ET
  • JOLTS
    10:00 AM ET
  • FOMC Minutes
    2:00 PM ET
  • Jerome Powell Speaks
    10:30 AM ET
  • EIA Petroleum Status Report
    11:00 AM ET
  • Treasury Budget
    2:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    9:15 PM ET
  • Thursday
  • Jobless Claims
    8:30 AM ET
  • PPI-FD
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Jerome Powell Speaks
    10:30 AM ET
  • EIA Petroleum Status Report
    11:00 AM ET
  • Treasury Budget
    2:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Raphael Bostic Speaks
    9:15 PM ET
  • Friday
  • Consumer Price Index
    8:30 AM ET
  • Retail Sales
    8:30 AM ET
  • Eric Rosengren Speaks
    8:30 AM ET
  • Business Inventories
    10:00 AM ET
  • Consumer Sentiment
    10:00 AM ET
  • Charles Evans Speaks
    10:25 AM ET
  • Robert Kaplan Speaks
    11:30 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Jerome Powell Speaks
    1:00 PM ET
  • Raphael Bostic Speaks
    9:15 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.