Week of February 27, 2017
In a short week with no major economic news, the focus for equity markets remained on a myriad of retail earnings calls at the end of the week. The Federal Reserve released the minutes from its January meeting but it didn't sway the markets one way or the other. It appears investors viewed the meeting as neutral with no new information given.
The committee continues to take a ‘wait and watch’ approach given the lack of fiscal policy details from the new administration. The markets started the week on a high note but cooled-off as investors sold last Friday. The Dow Jones Industrial Average closed positive for the 11th straight day last week, marking the longest streak since 1992 and posting a 0.96% return during the week's trading sessions. The S&P 500 and the NASDAQ Composite were both up as well, notching a 0.69% and 0.12%, respectively. On the other side of the Atlantic, European stocks were upbeat on more positive economic news. Solid earnings from Britain’s banks coupled with an upward revision to fourth quarter economic growth by approximately 1% pushed equities higher. On the other hand, better-than-expected business sentiment data from Germany led their markets higher, just shy of a two-year peak. Even the report on the French economy came in positive and the country’s economy is expanding by the most since 2011, outpacing Germany. So far during the New Year, almost all the economic data from the region, including inflation, has signaled that momentum may be stronger than expected.
What are we reading?
Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links:
Fed minutes show support for rate hike ‘fairly soon’
The Fed left rates unchanged in February as market participants were looking for hints as to when the three predicted hikes for the year could happen. The minutes described an economy that appears to be gaining strength and many of the committee members were ready to raise rates “fairly soon” if the economy continued to grow.
Five key points from International Petroleum Week
Crude inventories fell by 884,000 barrels over the previous week while analyst’s expectations were set on an increase of 3.5 million barrels. The surprise decline in U.S. crude stocks lent support to the view that the oil glut may finally be waning. Moreover, the production curb by OPEC and Russia illustrated a high level of compliance which added to market optimism and drove oil prices up last week.
U.S. existing home sales hit 10-year high in January
In the United States, existing home sales increased by 3.3% during January, reaching its highest level since February 2007. Increasing prices are countered by stabilizing mortgage rates and a stronger job market, leading to higher demand. Even so, the robust housing market will continue to encounter headwinds as the supply of existing homes shrink and new builds take time to catch up.
Fun Story of the Week
If someone were to ask you what you thought the world’s fastest accelerating production car was, what you would you answer? Lamborghini, Ferrari, Porsche, etc. are among the most common answers to this question. Even so, these answers are incorrect. In fact, Elon Musk’s Tesla Model S P100D is the quickest production car in 2017. With a 0-60 mph time of 2.28 seconds, the 2017 Model S employs a state of the art battery that focuses on gut wrenching acceleration rather than reducing our dependency on fossil fuels. Naming this option, the “Ludicrous” package, Tesla both gives a nod to the Mel Brooks 1987 comedy, “Spaceballs,” and challenges all preconceptions of electric cars. Forty-three-year-old Tesla owner Brooks Weisblat stated, “If you’re looking the wrong way, you get whiplash and your glasses fly off your head… You’ve got old-school, muscle-car guys who cannot handle an electric car beating them.”
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GENERAL DISCLOSURE
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
DJIA
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
NASDAQ COMPOSITE
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Wall Street Journal, February 2017. https://www.wsj.com/articles/whats-the-latest-buzz-in-electric-cars-speed-baby-1487953152