Telemus Weekly Market Review

May 28 – June 1, 2018

The stock market finished last week mostly higher as investors digested an easing of the political crisis in Italy and the development of a new one in Spain, fresh tariff-related trade developments, and the employment report for May. The S&P 500, up 0.49%, and the Nasdaq Composite, higher by 1.62%, advanced. The Dow Jones Industrial Average finished slightly lower, losing 0.48%.

U.S. markets opened the week on Tuesday following a three-day Memorial Day weekend. Sellers dominated that Tuesday session after Italian President Sergio Mattarella blocked the formation of a euro-skeptic government, vetoing the economic minister nominee of an anti-establishment coalition that was aiming to come to power. Italian bond yields surged in reaction as some feared the veto would prompt a snap election that could turn into a de facto referendum on Italy’s membership in the European Union. The Italian political crisis calmed down on Thursday evening, when President Mattarella approved the formation of a ruling coalition between Italy’s anti-establishment Five Star Movement and right-wing League party, effectively silencing the prospect of a snap election later this year.

German financial giant Deutsche Bank hit a 16-month low on Thursday after The Wall Street Journal reported that it’s on the Federal Reserve’s list of troubled banks. Elsewhere in Europe, Spain endured some political drama of its own last week as Prime Minister Mariano Rajoy was ousted on Friday in a no-confidence vote following a corruption scandal involving 29 individuals with ties to his People’s Party. Pedro Sanchez, the leader of the Socialist Party, will succeed Mr. Rajoy as prime minister.

Back in the U.S., the stock market rebounded from its Tuesday slide on Wednesday with energy shares leading the charge following reports that OPEC and Russia will keep production cuts in place until at least the end of the year. West Texas Intermediate crude futures rallied on Wednesday in reaction, but still finished the week lower by almost 3.0% closing at $65.71 in Nymex trading.

Stocks stumbled for a second time on Thursday when the Trump administration announced that it will let steel and aluminum tariff exemptions expire for the EU, Canada, and Mexico. The White House’s decision, which elicited retaliatory responses from the EU, Canada, and Mexico as expected, will result in duties of 25% on steel imports and duties of 10% on imports of aluminum, effective June 1.

Wall Street bounced back on Friday, bolstered by an easing of the political tension in Europe, news that the June 12 summit with North Korea is back on (for now), and the release of the closely watched Employment Situation report for May, which featured a better-than-expected increase in nonfarm payrolls and a lower-than-expected unemployment rate. The average hourly earnings figure came in as expected, showing a month-over-month increase of 0.3%.

The strong job growth and low unemployment rate created some good feelings about the potential for a pickup in consumer spending that should aid the second quarter growth outlook.

Six of eleven S&P sectors declined last week, with financials, telecom services, and industrials being the weakest performers. Conversely, energy, technology, and real estate were the top-performing groups.

Retailers dominated the earnings front once again, with Costco, Dollar General, Dollar Tree, Lululemon, Ulta Beauty, Dick’s Sporting Goods, to name a few report their quarterly results, which came in mixed.

U.S. Treasuries were volatile last week, eventually finishing with modest gains. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, finished the week lower by three basis points at 2.90%. Meanwhile, the U.S. Dollar Index eked out a fractional gain, settling the week at 94.22

June 4 – June 8 Economic Calendar

  • Monday
  • Factory Orders
    10:00 AM ET
  • TD Ameritrade IMX
    12:30 PM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • JOLTS
    10:00 AM ET
  • Consumer Credit
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Redbook
    8:55 AM ET

  • PMI Services Index
    9:45 AM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • JOLTS
    10:00 AM ET
  • Consumer Credit
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • International Trade
    8:30 AM ET
  • Productivity and Costs
    8:30 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Consumer Credit
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • Jobless Claims
    8:30 AM ET

  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Quarterly Services Survey
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Consumer Credit
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • Wholesale Trade
    10:00 AM ET

  • Baker-Hughes Rig Count
    1:00 PM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • JOLTS
    10:00 AM ET
  • Consumer Credit
    3:00 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.