Telemus Weekly Market Review

May 14  18, 2018 

The stock market took a turn for the worse last week with the S&P 500 falling 0.54%, the Nasdaq 0.66% and the Dow 0.47%. Small cap stocks outperformed with the Russell 2000 gaining 1.23%. The Russell 2000 closed at new record highs in each of the last three sessions of the week. Following last week’s decline, the S&P 500 and the Nasdaq are up 1.47% and 6.53% for the year, respectively, and the Dow is down 0.02%.

Beijing sent a delegation to Washington last week for a second round of trade talks after the first round failed to move the needle earlier this month. There was some optimism ahead of the negotiations after President Trump announced that he’s working to get Chinese phone company ZTE, which is suffering due to U.S. sanctions, “back into business.” The optimism faded after the president acknowledged that he’s doubtful a deal can be reached.

In other international developments, Italy’s major stock index fell last week and its 10-yr yield shot higher by 35 basis points as two anti-establishment parties, the 5 Star Movement and the League, neared forming a governing coalition that will almost certainly clash with the European Union.

On Wall Street, Treasury yields were in focus after they spiked to multi-year highs on Tuesday. The yield on the benchmark 10-yr Treasury note hit 3.11%, its highest level since July 2011, before slipping to 3.06% on Friday. Still, that represents a gain of 10 basis points for the week. The rise in “risk free” returns lured some buyers away from the equity market, putting May’s rally on hold.

Tuesday’s spike in Treasury yields coincided with the release of the Retail Sales report for April, even though the report came in as expected, showing a month-over-month increase of 0.3%.

On a related note, retailers dominated the earnings front last week, with Walmart, Home Depot, Macy’s, Nordstrom, and J.C. Penney reporting their quarterly results. All five companies beat earnings estimates, but Walmart, Home Depot, Nordstrom, and J.C. Penney fell short on same-store sales, sending their shares lower. Shares of Macy’s soared after the company beat same-store sales estimates and raised its guidance for the fiscal year.

Apart from earnings, shares of CBS dropped last week after a judge ruled against the company in its attempt to dilute its controlling shareholder, Shari Redstone, who is attempting to force a CBS-Viacom merger. The Redstone family controls both CBS and Viacom through its holding company, National Amusements.

As for the sector standings, decliners outnumbered advancers seven to four last week. The rate-sensitive utilities and real estate sectors were the worst-performing groups, largely due to the rise in Treasury yields. The heavily-weighted technology and financials spaces also struggled. On the upside, the energy and materials sectors were the top performers.

Crude-oil futures settled lower Friday closing at $71.35, but gained for the week, as investors wrestled with persistent growth in U.S. crude production against the backdrop of expected disruptions to the flow of oil in the Middle East.

May 21 – May 25 Economic Calendar

  • Monday
  • Chicago Fed National Activity Index
    8:30 AM ET
  • Raphael Bostic Speaks
    12:15 PM ET
  • Patrick Harker Speaks
    2:15 PM ET
  • Neel Kashkari Speaks
    5:30 PM ET
  • 2-Yr FRN Note Auction
    11:30 AM ET
  • 5-Yr Note Auction
    1:00 PM ET
  • FOMC Minutes
    2:00 PM ET
  • Neel Kashkari Speaks
    2:15 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Redbook
    8:55 AM ET
  • Richmond Fed Manufacturing Index
    10:00 AM ET

  • Patrick Harker Speaks
    2:15 PM ET
  • Neel Kashkari Speaks
    5:30 PM ET
  • 2-Yr FRN Note Auction
    11:30 AM ET
  • 5-Yr Note Auction
    1:00 PM ET
  • FOMC Minutes
    2:00 PM ET
  • Neel Kashkari Speaks
    2:15 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • PMI Composite Flash
    9:45 AM ET
  • New Home Sales
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • 2-Yr FRN Note Auction
    11:30 AM ET
  • 5-Yr Note Auction
    1:00 PM ET
  • FOMC Minutes
    2:00 PM ET
  • Neel Kashkari Speaks
    2:15 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • William Dudley Speaks
    4:15 AM ET
  • Jobless Claims
    8:30 AM ET

  • FHFA House Price Index
    9:00 AM ET

  • Bloomberg Consumer Comfort Index
    9:45 AM ET

  • Existing Home Sales
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Patrick Harker Speaks
    2:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • Durable Goods Orders
    8:30 AM ET

  • Jerome Powell Speaks
    9:20 AM ET

  • Consumer Sentiment
    10:00 AM ET

  • Raphael Bostic Speaks
    11:45 AM ET

  • Robert Kaplan Speaks
    11:45 AM ET

  • Charles Evans Speaks
    11:45 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Neel Kashkari Speaks
    2:15 PM 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.