Telemus Weekly Market Review

October 15 – October 19, 2018

The markets were mixed last week, recovering somewhat from the heavy losses taken the prior week. The benchmark S&P 500 finished up 0.02%, the blue chip Dow gained 0.41%, the tech heavy Nasdaq fell 0.64%, and the small-cap Russell 2000 lost 0.30%.

The third quarter earnings season ramped up last week. Financial companies Goldman Sachs, Morgan Stanley, Bank of America, U.S. Bancorp, Charles Schwab, and BlackRock reported mostly better than expected profits, helping to boost the S&P financial sector higher.

Meanwhile, the health care sector rallied after Dow components Johnson & Johnson and UnitedHealth beat earnings estimates and issued better than consensus guidance.

Software giant Adobe Systems surged nearly 10% on Tuesday after it reaffirmed fourth quarter guidance and said it expects fiscal year 2019 revenues to be up 20%. The information technology sector trailed the broader market overall though, losing 1.2%. Chipmakers were relatively weak, with the Philadelphia Semiconductor Index falling 2.2%.

Netflix was another notable name on last week’s earnings calendar. The streaming media giant beat earnings estimates and reported better than expected subscriber growth by adding nearly seven million new subscribers last quarter with six million coming from overseas. However, shares fell later in the week on news that The Wall Street Journal is investigating the company’s corporate culture.

Home improvement retailers Home Depot and Lowe’s sold off on Wednesday following some disappointing housing data. Housing starts rose to a seasonally adjusted annualized rate of 1.201 million units in September, below the consensus estimate of 1.221 million, and building permits declined to a seasonally adjusted annualized rate of 1.241 million, also below the consensus estimate of 1.273 million.

The minutes from the September FOMC meeting were released on Wednesday, showing that officials generally agreed on the need for more gradual rate hikes. In addition, the minutes revealed that a number of officials saw the need to hike rates above levels expected to prevail over the long run.

Additionally on Wednesday, Canada became the second country in the world to legalize marijuana, causing a sell the news reaction in the smoking hot, no pun intended, weed stocks.

On Friday, China reported 6.5% year over year GDP growth, less than the prior quarter’s growth of 6.7% and less than the expected growth of 6.6%. China’s Shanghai Composite touched a new four-year low last week due to investor concerns over slowing economic growth.

As for the 11 S&P 500 sectors, they finished last week pretty evenly mixed between green and red. Defensive groups like consumer staples, utilities, and real estate were the top performers, while growth-sensitive groups like consumer discretionary, energy and materials finished at the bottom of the sector standings.

In the bond markets interest rates were slightly lower last week, pushing yields broadly higher. The yield on the benchmark 10 year U.S. Treasury note climbed three basis points to end the week at 3.20%.

WTI crude fell to $69.26 a barrel on Friday, a decline of over 3% from the prior week.

In other news the disappearance and alleged murder of Washington Post columnist Jamal Khashoggi pressured U.S. Treasury Secretary Steven Mnuchin into pulling out of the Future Investment Initiative conference being held in Saudi Arabia. President Trump expressed confidence in intelligence reports that the murder was ordered by high-level Saudi officials, but stopped short of putting the blame on Saudi Arabia’s crown prince Mohammed bin Salman.

Also of note last week Sears filed for Chapter 11 bankruptcy. A wave of store closures and deals has failed to save the struggling retailer.

October 22 – October 26 Economic Calendar

  • Monday
  • Chicago Fed National Activity Index
    8:30 AM ET
  • Neel Kashkari Speaks
    9:30 AM ET

  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • Raphael Bostic Speaks
    1:30 PM ET
  • Robert Kaplan Speaks
    2:15 PM ET
  • Charles Evans Speaks
    6:15 PM ET
  • James Bullard Speaks
    11:30 AM ET
  • Loretta Mester Speaks
    12:30 PM ET
  • Raphael Bostic Speaks
    2:00 PM ET
  • Beige Book
    2:00 PM ET
  • Loretta Mester Speaks
    7:00 PM ET
  • Tuesday
  • Redbook
    8:55 AM ET

  • Neel Kashkari Speaks
    9:30 AM ET

  • Richmond Fed Manufacturing Index
    10:00 AM ET
  • Raphael Bostic Speaks
    1:30 PM ET
  • Robert Kaplan Speaks
    2:15 PM ET
  • Charles Evans Speaks
    6:15 PM ET
  • James Bullard Speaks
    11:30 AM ET
  • Loretta Mester Speaks
    12:30 PM ET
  • Raphael Bostic Speaks
    2:00 PM ET
  • Beige Book
    2:00 PM ET
  • Loretta Mester Speaks
    7:00 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • FHFA House Price Index
    9:00 AM ET
  • PMI Composite FLASH
    9:45 AM ET
  • New Home Sales
    10:00 AM ET
  • Raphael Bostic Speaks
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • James Bullard Speaks
    11:30 AM ET
  • Loretta Mester Speaks
    12:30 PM ET
  • Raphael Bostic Speaks
    2:00 PM ET
  • Beige Book
    2:00 PM ET
  • Loretta Mester Speaks
    7:00 PM ET
  • Thursday
  • Durable Goods Orders
    8:30 AM ET
  • International Trade in Goods
    8:30 AM ET

  • Jobless Claims
    8:30 AM ET
  • Retail Inventories [Advance]
    8:30 AM ET

  • Wholesale Inventories [Advance]
    8:30 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Loretta Mester Speaks
    7:00 PM ET
  • Friday
  • GDP
    8:30 AM ET

  • Consumer Sentiment
    10:00 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Raphael Bostic Speaks
    1:30 PM ET
  • Robert Kaplan Speaks
    2:15 PM ET
  • Charles Evans Speaks
    6:15 PM ET
  • James Bullard Speaks
    11:30 AM ET
  • Loretta Mester Speaks
    12:30 PM ET
  • Raphael Bostic Speaks
    2:00 PM ET
  • Beige Book
    2:00 PM ET
  • Loretta Mester Speaks
    7:00 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.