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Weekly Market Snapshot

December 8, 2017

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

The economic data reports remained consistent with a moderate pace of economic growth in the near term. Nonfarm payrolls rose by 228,000, more than expected, in November, lifted partly by gains in retail (following a weak trend for much of 2017) and an unexpected pickup in manufacturing. Note that private-sector payrolls averaged a 173,000 gain over the last three months (vs. a +170,000 average for the first 11 months of 2017, the exact same pace as in 2016). The unemployment rate held steady at 4.1%. Average hourly earnings rose 0.2%, as anticipated, but figures for September and October were each revised lower, leaving the year-over-year gain at 2.5%.

Congress passed a Continuing Resolution to fund the government for another two weeks (to December 22), and most likely lawmakers will kick the can down the road into January. Lawmakers worked to bring the House and Senate tax cut bills together (Alabama’s December 12 senatorial election result may prompt them to work a little faster).

Next week, the mid-month economic figures will help to fill in the 4Q17 picture, but the focus will be on the Fed policy meeting. The Fed is widely expected to raise short-term interest rates another 25 basis points. Market participants may look to the revised dot plot (senior Fed officials’ forecasts of the year-end federal funds target rate) to gauge the likely course of policy in 2018 – however, many of the individuals behind the dots will change in 2018. This will be Janet Yellen’s last post-FOMC press conference. Needless to say, with new leadership and other personnel changes, how the Fed reacts to a tightening labor market will be one of the main financial market uncertainties in 2018.


Indices

  Last Last Week YTD return %
DJIA 24211.48 24272.35 22.51%
NASDAQ 6812.84 6873.97 26.56%
S&P 500 2636.98 2647.58 17.78%
MSCI EAFE 1997.81 2020.13 18.63%
Russell 2000 1520.47 1544.14 12.04%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.25 3.50
Fed Funds 1.16 0.41
30-year mortgage 3.97 4.15

Currencies

  Last 1 year ago
Dollars per British Pound 1.347 1.259
Dollars per Euro 1.177 1.062
Japanese Yen per Dollar 113.09 114.04
Canadian Dollars per Dollar 1.285 1.319
Mexican Peso per Dollar 18.969 20.317

Commodities

  Last 1 year ago
Crude Oil 56.69 50.84
Gold 1253.10 1172.40

Bond Rates

  Last 1 month ago
2-year treasury 1.79 1.65
10-year treasury 2.37 2.37
10-year municipal (TEY) 2.98 3.00

Treasury Yield Curve – 12/08/2017


As of close of business 12/07/2017


S&P Sector Performance (YTD) – 12/08/2017



As of close of business 12/07/2017


Economic Calendar

December 12  —  Producer Price Index (November)
December 13  —  Consumer Price Index (November)
 —  FOMC Policy Decision (Yellen press conference)
December 14  —  Jobless Claims (week ending December 9)
 —  Retail Sales (November)
 —  Import Prices (November)
December 15  —  Industrial Production (November)
December 19  —  Industrial Production (November)
December 21  —  Real GDP (3Q17, 3rd estimate)
December 22  —  Durable Goods Orders (November)
 —  Personal Income and Spending (November)
December 25  —  Christmas Holiday (markets closed)
January 1  —  New Year’s Holiday (markets closed)
January 5  —  Employment Report (December)

 

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 December 07, 2017.

“Financial fitness is not a pipe dream or a state of mind, it’s a reality if you are willing to pursue it and embrace it.”

– Will Robinson