Performance for Week Ending 5/5/2017:
The Dow Jones Industrial Average (Dow) gained 0.32%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) added 0.39%, the Standard & Poor’s 500 Index (S&P 500) finished up 0.63% and the Nasdaq Composite Index (NASDAQ) tacked on 0.88%. Sector performance was positive with 9 of the 11 S&P sector groups finishing higher. The Technology (+1.36%) sector posted the best gain while Telecom (-1.17%) posted the worst.
||Closing Price 5/5/2017
||Percentage Change for Week Ending 5/5/2017
||Year-to-Date Percentage Change Through 5/5/2017
*See below for Index Definitions
MARKET OBSERVATIONS: 5/1/2017 – 5/5/2017
The major market indices finished higher for a third consecutive week on building signs the recent economic “soft patch” may be coming to an end. The stronger than expected first quarter earnings season also contributed to the positive tone. For a second straight week the Technology sector led the advance higher.
First quarter earnings season has been a positive catalyst with results coming in at the strongest pace in over 5 years. Through Friday, 410 members of the S&P 500 have reported quarterly results with 78% surprising to the upside. With more than 80 percent of the S&P 500 reporting, earnings are tracking at a very solid +15.7% year-over-year pace on revenue growth of 8.2%.
On the economic front, following the much weaker than expected report during the month of March, non-farm payrolls rebounded to a solid 211K during the month of April. The results were moderately ahead of the 190K expected by economists and a strong rebound from the79K nonfarm jobs created during March. The unemployment rate fell to 4.4% (from 4.5%), the lowest since May 2007.
Outlook Unchanged: In the near-term stocks are likely to trade sideways as investors weigh policy rhetoric against improving economic and earnings growth. Concern over elevated valuation levels may also limit near-term upside potential. However, on an intermediate term basis, the outlook for the US market still remains favorable. The economy continues to move forward and, most importantly, the earnings environment has turned positive. Earnings are forecast to post solid year-over-year growth trends in the coming quarters, which in turn, should help taper concerns over current levels of valuation. If the market were to stage a pullback in the coming weeks – we would view it as healthy and corrective in nature and not the start of a broader leg lower - in other words, a good buying opportunity, especially for longer-term investors.
The Week Ahead: On the data front, reports of interest include: the Labor Department’s March job openings and labor turnover survey (JOLTS), April import and export prices, the April Producer Price Index (PPI), the April Consumer Price Index (CPI), April retail sales, March business inventories and the University of Michigan’s May consumer sentiment survey. First-quarter earnings season will begin to wind down this week with just 41 members of the S&P scheduled to release results. Fed Heads will be out and about this week with seven Fed officials scheduled to make public appearances.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.
Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Indices do not include any expenses, fees, or sales charges, which would lower performance. Indices are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.
The individual companies mentioned in this piece were for informational purposes only and should not be viewed as recommendations.
The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. This document contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Information in this report does not pertain to any investment product and is not a solicitation for any product. This material has been prepared using sources of information generally believed to be reliable. No representation can be made as to its accuracy.
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*Assets under management is as of 09.30.2018 and includes leverage of $11.8bn.
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