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Weekly Market Snapshot

  • 03.17.17
  • Markets & Investing
  • Capital Markets
  • Article

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist
March 17, 2017

As was widely expected, the Federal Open Market Committee raised the target range for the federal funds rate by 25 basis points, to 0.75-1.00%, citing realized and expected progress toward the Fed’s employment and inflation objectives. The Fed’s Board of Governors also approved a 25-basis-point increase in the primary credit rate (the discount rate) to 1.50%. In the Fed’s Summary of Economic Projections, senior Fed officials’ projections of growth, unemployment and inflation were little changed from December. A few of the more dovish dots in the dot plot edged up, but the median expectation for the number of rate hikes this year remained at three. Financial market participants had feared that it could rise to four. Still, future Fed policy moves will remain data dependent. 

The economic data were mixed. Retail sales rose modestly in February (a transitional month for most retailers), but January figures were revised higher. Industrial production was softer than expected in February, but that was due to another large drop in the output of utilities (reflecting unseasonably warm temperatures). Manufacturing output rose moderately. Residential construction figures were mixed, suggesting single-family strength on top of the usual multi-family volatility. For the private sector, the quit rate rose to 2.5% in January, the highest since before the recession. The Consumer Price Index rose 0.1% (+2.7% y/y), up 0.2% ex-food & energy (+2.2% y/y). The Producer Price Index rose 0.3% (+2.2% y/y), reflecting a surge in electricity prices, but there were also signs of pipeline pressures at the earlier stages of production. The Small Business Optimism Index edged back, but remained close to its 12-year high.

Next week, the calendar thins out again. February home sales data aren’t particularly meaningful (noisy and subject to seasonal distortions). Investors will look to Friday’s durable goods orders to gauge the strengthening in business fixed investment.


Indices

  Last Last Week YTD return %
DJIA 20934.55 20936.15 5.93%
NASDAQ 5900.76 5864.34 9.62%
S&P 500 2381.38 2374.67 6.37%
MSCI EAFE 1796.80 1747.86 6.70%
Russell 2000 1386.03 1347.86 2.13%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.00 3.50
Fed Funds 0.90 0.37
30-year mortgage 4.27 3.73

Currencies

  Last 1 year ago
Dollars per British Pound 1.236 1.448
Dollars per Euro 1.077 1.132
Japanese Yen per Dollar 113.31 111.39
Canadian Dollars per Dollar 1.332 1.298
Mexican Peso per Dollar 19.265 17.319

Commodities

  Last 1 year ago
Crude Oil 48.75 40.20
Gold 1227.10 1265.00

Bond Rates

  Last 1 month ago
2-year treasury 1.32 1.18
10-year treasury 2.52 2.40
10-year municipal (TEY) 3.78 3.69

Treasury Yield Curve – 03/17/2017

Treasury Yield

As of close of business 03/16/2017


S&P Sector Performance (YTD) – 03/17/2017


S&P Sectors

As of close of business 03/16/2017


Economic Calendar

March 21  —  Current Account Deficit (4Q16)
March 22  —  Existing Home Sales (February)
March 23  —  Jobless Claims (week ending March 18)
 —  New Home Sales (February)
March 24  —  Durable Goods Orders (February)
March 28  —  CB Consumer Confidence (March)
March 29  —  Pending Home Sales Index (February)
March 30  —  Real GDP (4Q16, 3rd estimate)
March 31  —  Personal Income and Spending (February)
April 7  —  Employment Report (March)
May 3  —  FOMC Policy Decision (no press conference)
June 14  —  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 March 16, 2017.