TBT Financial Services

Weekly Market Snapshot

May 18, 2017

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

Stock market participants finally paid some attention to the White House / Russia scandal, following reports that President Trump had leaked “highly classified” info to Russian officials in the oval office (the day after FBI Director Comey was fired). Fear that the Trump agenda of reduced regulation, tax cuts and infrastructure spending was at risk sent the major market indices lower. Bond yields fell and the Fed rate hike odds dipped. That reaction was short-lived, however, as investors concluded that the process was going to take a long time and would unlikely result in Trump’s removal from office. 

The week’s economic data were not especially market-moving. Industrial production surprised to the upside in April, but that followed unexpected weakness in March. Residential construction figures were weaker than expected in April, but adjustments for the late Easter and the usual statistical noise make those results suspect (the underlying trends appear strong and the housing fundamentals are still solid). 

Next week, the important data arrive at the end of the week. Monthly home sales figures are choppy, but the underlying trends should remain consistent with gradual improvement (mild weather in February and March may have pulled forward some seasonal activity which otherwise would have occurred in April). The FOMC minutes are likely to provide few new clues, but the markets could easily over-react to any quotes taken out of context. The estimate of first quarter GDP growth should be revised higher, but there’s a lot of uncertainty (figures will be revised again next month). The durable goods report should help in gauging whether the first quarter pickup in business fixed investment will continue into 2Q17. The bond market will close early on Friday.


Indices

  Last Last Week YTD return %
DJIA 20663.02 20919.42 4.56%
NASDAQ 6055.13 6115.97 12.48%
S&P 500 2365.72 2394.44 5.67%
MSCI EAFE 1868.75 1858.52 10.97%
Russell 2000 1361.08 1390.20 0.29%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.00 3.50
Fed Funds 0.91 0.37
30-year mortgage 3.99 3.62

Currencies

  Last 1 year ago
Dollars per British Pound 1.289 1.466
Dollars per Euro 1.110 1.120
Japanese Yen per Dollar 111.49 109.96
Canadian Dollars per Dollar 1.360 1.309
Mexican Peso per Dollar 18.838 18.424

Commodities

  Last 1 year ago
Crude Oil 49.35 48.16
Gold 1252.80 1254.80

Bond Rates

  Last 1 month ago
2-year treasury 1.27 1.18
10-year treasury 2.24 2.25
10-year municipal (TEY) 3.11 3.17

Treasury Yield Curve – 05/19/2017


As of close of business 05/18/2017


S&P Sector Performance (YTD) – 05/19/2017



As of close of business 05/18/2017


Economic Calendar

May 23  —  New Home Sales (April)
May 24  —  Existing Home Sales (April)
 —  FOMC Minutes (May 2-3)
May 25  —  Jobless Claims (week ending May 20)
May 26  —  Durable Goods Orders (April)
 —  Real GDP (1Q17, 2nd estimate)
 —  UM Consumer Sentiment (May)
May 29  —  Memorial Day (markets closed)
June 1  —  ADP Payroll Estimate (May)
 —  ISM Manufacturing Index (May)
June 2  —  Employment Report (May)
 —  Real GDP (1Q17, 2nd estimate)
June 14  —  FOMC Policy Decision (Yellen press conference)
July 26  —  FOMC Policy Decision (no Yellen press conference)
September 20  —  FOMC Policy Decision (Yellen press conference)

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business May 18, 2017.

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