Telemus Weekly Market Review

April 23 – April 27, 2018

The S&P 500 was up and down last week, but ended basically flat, down 0.1%. The Nasdaq Composite and the Dow Jones Industrial Average, meanwhile, finished the week with losses of 0.37% and 0.62%, respectively. Earnings were the focal point, but rising Treasury yields, policy decisions from the European Central Bank and the Bank of Japan, and a historic meeting between the leaders of North and South Korea also received attention.

The week was the busiest week of the first quarter earnings season, with more than a third of S&P 500 companies reporting their results which largely came in better than expected. However, the market’s reaction didn’t always correlate with the upbeat headlines.

For instance, in the industrial sector, 3M, Caterpillar, Lockheed Martin, and United Tech all dropped on Tuesday after reporting their first quarter results, which, headline-wise, came in above-consensus. Caterpillar initially shot higher, but reversed sharply, taking the broader market with it, after saying on its post-earnings conference call that margins in the first quarter will likely be the “high water mark” for the year.

Conversely, the consumer discretionary sector finished with a solid gain boosted by a blowout quarter from Amazon which easily topped both earnings and revenue estimates for the first quarter. Chipotle Mexican Grill also rallied on its better-than-expected results, surging nearly 25% on Thursday to close at its highest level in nearly a year.

A number of technology heavyweights reported their first quarter earnings this week, including Alphabet, Facebook, Microsoft, and Intel. Despite recent concerns Facebook soared after handily beating consensus estimates, Microsoft climbed after also beating on the top and bottom lines, Intel slid despite an upbeat report, and Alphabet tumbled after its weaker-than-expected operating margins overshadowed its much better-than-expected earnings and revenues.

Outside of earnings, investors kept a close eye on Treasury yields, which touched new multi-year highs on Wednesday before pulling back in the final two sessions. The benchmark 10-yr yield crossed the psychologically important 3.0% mark for the first time in over four years, going as high as 3.03%, before closing the week at 2.96%.
The preliminary reading of first quarter GDP crossed the wires on Friday, showing an annualized increase of 2.3% which was better than the consensus of +2.1%, but a deceleration from the fourth quarter growth rate of 2.9%. The key takeaway from the report is that consumer spending was weak in the first quarter, increasing just 1.1% after increasing 4.0% in the fourth quarter. Real final sales, which exclude the change in inventories and are often viewed as the better gauge of growth, were up only 1.9% versus the prior ten quarter average of 2.2%.
Across the pond, the European Central Bank released its latest policy directive on Thursday morning, which, as expected, left interest rates unchanged and confirmed that net asset purchases will remain at the current monthly pace of 30 billion euro until the end of September 2018, or beyond, if necessary.

In Asia, the Bank of Japan also left interest rates unchanged, but removed from its policy statement a reference to reaching its 2.0% inflation target in fiscal year 2019/2020. However, the biggest story of the week in Asia came from the Korean Peninsula, where the leaders of North and South Korea came together for a historic summit. The two leaders signed a pact that seeks permanent and solid peace and stated an aim to work towards a complete denuclearization of the Korean Peninsula.
Crude oil closed Friday at $67.97 down slightly for the week.

April 30 – May 4 Economic Calendar

  • Monday
  • Personal Income and Outlays
    8:30 AM ET
  • Chicago PMI
    9:45 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • Dallas Fed Mfg Survey
    10:30 AM ET
  • Construction Spending
    10:00 AM ET
  • PMI Services Index
    9:45 AM ET
  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    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
  • Tuesday
  • FOMC Meeting Begins
  • Redbook
    8:55 AM ET

  • PMI Manufacturing Index
    9:45 AM ET
  • ISM Mfg Index
    10:00 AM ET
  • Construction Spending
    10:00 AM ET
  • PMI Services Index
    9:45 AM ET
  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    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
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • ADP Employment Report
    8:15 AM ET
  • Treasury Refunding Announcement
    8:30 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • FOMC Meeting Announcement
    2:00 PM ET
  • PMI Services Index
    9:45 AM ET
  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    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
  • Thursday
  • Challenger Job-Cut Report
    7:30 AM ET

  • International Trade
    8:30 AM ET
  • Jobless Claims
    8:30 AM ET
  • Productivity and Costs
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • PMI Services Index
    9:45 AM ET
  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    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

  • International Trade in Goods

  • William Dudley Speaks
    12:45 PM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Treasury STRIPS
    3:00 PM ET
  • Randal Quarles speaks on Sunday
    7:00 PM ET
  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    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

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.