Telemus Weekly Market Review

March 26-30, 2018

Stocks rebounded last week, ending a two-week skid. The Dow Jones Industrial Average rose 569 points, or 2.4%, to 24,103, though it fell 2.5% in the first quarter. The Standard & Poor’s 500 index gained 2% to 2640.87, but fell 1.2% in the quarter. The Nasdaq Composite increased 1%, to 7063.44, last week but posted a 2.3% quarterly loss. All sectors were in the red for the quarter save for tech and consumer-discretionary stocks. Markets were closed on March 30 for Good Friday.

Investors kicked off the week with a rally on Monday, pushing the major indices up between 2.7% and 3.3% apiece, following a Wall Street Journal report that the U.S. and China have started negotiating to improve American access to Chinese markets. The news helped ease fears of a trade war, which were elevated after the White House announced tariffs on Chinese imports the previous week prompting Beijing to retaliate with tariffs of its own. Microsoft was particularly strong on Monday, spiking around 7.5%, after Morgan Stanley raised its target price from $110 to $130 a new Street high.

The market reversed course on Tuesday, however, with FAANG names Facebook, Amazon, Apple, Netflix, and Alphabet leading the retreat. Market darling NVIDIA tumbled nearly 8.0% after announcing that it has temporarily suspended autonomous driving tests in order to learn more about last week’s fatal collision involving a self-driving Uber car. Tesla, which is a leader in autonomous driving technology, also dropped around 8.0%.

Stocks struggled for direction on Wednesday, but then rallied on Thursday ahead of the extended Easter weekend. However, unlike many of its FAANG peers, Amazon continued tumbling after a report on Wednesday that President Trump would like to change Amazon’s tax treatment, as he believes the company has gotten a free ride from taxpayers. The White House initially responded by saying there aren’t any policy changes regarding Amazon at the moment, but the president reiterated his concerns about the company in a tweet on Thursday. Amazon shares lost 3.2% this week in total.

11 of 11 S&P 500 sectors finished last week with gains. Less-risky countercyclical groups like consumer staples, utilities, and telecom services were the top performers, while the heavily-weighted financial sector also showed relative strength. The top-weighted technology space lagged while the consumer discretionary sector was among the worst performers, thanks largely to Amazon.

Investors received the Personal Income and Spending report for February on Thursday, and, for the second month in a row, it was in line with expectations. The PCE Price Index increased 1.8% year-over-year after being up 1.7% year-over-year in January, while the core PCE Price Index rose 1.6% year-over-year after three consecutive months of 1.5% year-over-year growth. The key takeaway from the report is that it won’t influence Fed officials to significantly alter the course of monetary policy.

In the bond market, the yield curve flattened notably last week, with the 2s10s spread dropping seven basis points to 48 bps its lowest level since 2007. The yield on the benchmark 10-yr U.S. Treasury note declined seven basis points to 2.74%, while the 2-yr yield held steady at 2.26%. Most of the bond buying took place amid the equity sell off on Tuesday.

Crude oil ended trading last week at $64.91 a drop of 1.25% from the previous week’s close.

April 2-6 What To Look For

  • Monday
  • PMI Manufacturing Index
    9:45 AM ET
  • ISM Mfg Index
    10:00 AM ET
  • Construction Spending
    10:00 AM ET
  • Neel Kashkari Speaks
    6:00 PM ET
  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Loretta Mester Speaks
    11:00 AM ET
  • Tuesday
  • Redbook
    8:55 AM ET

  • Neel Kashkari Speaks
    9:30 AM ET
  • Construction Spending
    10:00 AM ET
  • Neel Kashkari Speaks
    6:00 PM ET
  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Loretta Mester Speaks
    11:00 AM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • ADP Employment Report
    8:15 AM ET
  • James Bullard Speaks
    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 Petroleum Status Report
    10:30 AM ET
  • Loretta Mester Speaks
    11:00 AM ET
  • Thursday
  • Challenger Job-Cut Report
    7:30 AM ET
  • International Trade
    8:30 AM ET
  • Jobless Claims
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Raphael Bostic Speaks
    1:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • Employment Situation
    8:30 AM ET
  • Charles Evans speaks on Saturday
    10:30 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Consumer Credit
    3:00 PM ET

  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Loretta Mester Speaks
    11:00 AM 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.