Telemus Weekly Market Review

October 10 – 14

The month of October has gotten off to a rough start for the stock market. Last week produced another losing week for the major indices. The NASDAQ fared the worst with a 1.48% decline while the Dow Jones Industrial Average fared the best, relatively speaking, with a 0.56% decline. The S&P 500 was down 0.96%. There was a familiar undercurrent driving things, too, as the losses flowed in the face of a strengthening dollar and rising long-term rates.

The US Dollar Index increased 1.5% last week to 98.09, benefiting mostly at the expense of a weaker euro, a weaker yen, and a weaker British pound. The greenback’s strength was partly a function of safe-haven flows and partly a function of interest-rate differentials.

The latter stemmed from ongoing musings from Federal Reserve officials that a rate hike is likely to happen sooner rather than later (i.e. before the end of the year) and a trade balance report out of China that included a 10% year-over-year decline in exports in September.

The release of the minutes from the September 20-21 FOMC did nothing to dispel the rate-hike notion and neither did a batch of economic data out of the U.S. that featured the lowest four-week moving average for initial claims since November 3, 1973, reassuring retail sales activity for September, and an improving trend in producer price inflation. Strikingly, the yield on the 10-yr note climbed six basis points this week to 1.80% and has now risen 20 basis points since the end of September.

The strength in the dollar and the increase in long-term rates had the combined effect of raising earnings concerns for U.S. multinational companies and triggering general valuation concerns for a market trading already with a stretched valuation.

At the same time, it has been regarded as problematic for emerging market economies as a stronger dollar makes it more challenging to repay dollar-denominated debt and higher rates in the U.S. encourage capital flight. The iShares MSCI Emerging Markets ETF fell 2.2% for the week.

Other areas that one might have thought would have fallen with the jump in rates did not. Specifically, the best-performing sectors for the week were the utilities (+1.3%), real estate (+1.2%), telecom services (+0.7%), and consumer staples (+0.04%) sectors — all of which have benefited in the past as long-term rates have come down on the basis that they offer more attractive dividend yields.

Oil closed up 1.02% last week ending Friday’s trading at $50.32 – the fourth consecutive week of gains and the longest winning streak since April. The entire advance came in Monday’s trading, the balance of the week crude traded down amid concern over the persistent oversupply of oil and skepticism that major oil producers will be able to coordinate the production cut they agreed to last month. 

October 17 – 21 Economic Calendar

  • Monday
  • Empire State Mfg Survey
    8:30 AM ET
  • Industrial Production
    9:15 AM ET
  • Housing Market Index
    10:00 AM ET

  • Treasury International Capital
    4:00 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Rob Kaplan
    Speaks
    1:30 PM ET
  • Beige Book
    2:00 PM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Consumer Price Index
    8:30 AM ET

  • Redbook
    8:55 AM ET
  • Housing Market Index
    10:00 AM ET

  • Treasury International Capital
    4:00 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Rob Kaplan
    Speaks
    1:30 PM ET
  • Beige Book
    2:00 PM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • Housing Starts
    8:30 AM Et
  • John Williams Speaks
    8:45 AM ET
  • Atlanta Fed Business Inflation Expectations
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Rob Kaplan
    Speaks
    1:30 PM ET
  • Beige Book
    2:00 PM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • Philadelphia Fed Business Outlook Survey
    8:30 AM ET

  • Jobless Claims
    8:30 AM ET
  • William Dudley
    Speaks
    8:30 AM ET
  • William Dudley
    Speaks
    9:00 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Existing Home Sales
    10:00 AM ET
  • Leading Indicators
    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
  • Daniel Tarullo Speaks
    10:15 AM ET

  • Baker-Hughes Rig Count
    1:00 PM ET
  • Housing Market Index
    10:00 AM ET

  • Treasury International Capital
    4:00 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Rob Kaplan
    Speaks
    1:30 PM ET
  • Beige Book
    2:00 PM ET
  • EIA Natural Gas Report
    10:30 AM 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.