Market Perspective for January 30, 2017

Bullish sentiment and positive earnings reports propelled the major averages to record highs last week. Earnings could drive the market again this week, but three central bank meetings and economic reports will also impact trading.

The Bank of Japan, U.S. Federal Reserve and Bank of England are all expected to leave interest rates unchanged this week. At its last meeting, the Fed signaled it might hike three times this year, but investors are growing skeptical following last week’s weaker-than-expected GDP report.

The Bureau of Economic Analysis reports personal income increased 0.3 percent in December, up from 0.1 percent in November. Consumer spending rose 0.5 percent. Core personal consumption expenditures (PCE) inflation was 0.1 percent. Year-over-year, core PCE was 1.7 percent. Pending home sales figures from December, the Case-Schiller Home Price Index for November, and January’s consumer confidence data will be out later in the week.

In addition to the Fed meeting, the Markit and ISM Purchasing Managers’ Indexes, auto sales for January, construction spending in December, weekly mortgage purchase applications index and oil inventory will all be released on Wednesday. Last week, the flash numbers for the U.S., U.K., Europe and Japan were all positive. Economists forecast a slight decline in light vehicle sales, mortgage applications and crude inventory levels.

The monthly jobs report for January will be available on Friday. Analysts expect the economy to have generated 175,000 new jobs, but the headline unemployment rate is forecast to remain unchanged at 4.7 percent. The ISM service sector PMI will also be out on Friday.

One-third of the S&P 500 Index has reported earnings thus far, and this week will see another wave of blue chip reports. Thanks to earnings beats in the financial and technology sectors, earnings growth is up to 4.2 percent from the initial 3.1 percent estimate.

Apple and Exxon will be among the more prominent firms reporting this week.

Apple (AAPL), Exxon Mobil (XOM), Pfizer (PFE), United Parcel Service (UPS), Eli Lilly (LLY) and MasterCard (MA) will report on Tuesday. These companies have a combined market capitalization of roughly $1.4 trillion.

Facebook (FB), Altria Group (MO), Johnson Controls (JCI), Met Life (MET) and NXP Semiconductors (NXPI) are scheduled to report on Wednesday.

Thursday is another big day with Amazon (AMZN), Merck (MRK), Visa (V), Royal Dutch Shell (RDS.A), Philip Morris International (PM), Amgen (AMGN), Novo Nordisk (NVO), ConocoPhillips (COP) and AstraZeneca (AZN) on tap.

Honda (HMC), Phillips 66 (PSX), Hershey (HSY) and Clorox (CLX) will report on Friday.

Market Perspective for January 27, 2017

Market Perspective for January 27, 2017

The Dow Jones Industrial Average broke through the important psychological level of 20,000 on Wednesday and sustained those gains through Friday’s close.  The S&P 500 Index reached 2,300 and the Nasdaq topped 5,600. Global stocks rose with the U.S. averages. The pan-European STOXX 600 Index reached its highest level in more than a year. SPDR Financials (XLF) and Technology (XLK) both gained more than 1 percent. The SPDR Materials (XLB) rose more than 3 percent after Senate Democrats proposed $1 trillion in infrastructure spending as an olive branch to the Trump administration.

In response to the recent British High Court ruling on Brexit, Prime Minister Theresa May is fast-tracking Article 50 legislation through Parliament. The bill appears to have enough support to pass, with opposition Labour leader Jeremy Corbyn telling his members to vote for the bill. Defying dire predictions, the British economy grew faster than expected after its vote to leave the European Union. Preliminary data released Thursday suggests the U.K. was the fastest-growing G7 economy in 2016.

The Eurozone’s flash Purchasing Managers’ Indexes (PMI), released on Tuesday, hit a 69-month manufacturing high, while Japan reached a 34-month high and the U.S. a 22-month high, pointing to faster global economic growth in 2017.

New and existing home sales unexpectedly fell in December in response to higher mortgage rates and lower inventory. This was offset, however, by a 4-percent increase in mortgage purchase applications. As expected, the Richmond and Kansas City Fed Surveys showed sustained regional manufacturing and service sector growth. The weekly unemployment figures came in slightly higher than expectations at 259,000. While analysts had forecast a large draw, oil inventories rose by almost 300,000 barrels. Despite this, the price of oil rose above $54 per barrel before settling back. Gold, the U.S. dollar and Treasuries were lower on the week.

Fourth-quarter GDP growth, came in short of expectations at 1.9 percent. The consensus forecast was 2.2 percent. The trade balance was responsible for an estimated 1.7 percent of that miss. The market took the GDP report in stride, with barely a ripple in interest rates as investors turn their attention to 2017. Fixed investment increased 0.67 percent. This category includes residential and non-residential structures, as well as equipment and intellectual property. The prior five quarters were either negative (subtracting from GDP growth) or flat.

Overall, earnings were positive this week, reflected in the market’s advance to new all-time highs. Industrials, technology, materials, and consumer discretionary sector funds also made new all-time highs. Key revenue misses hurt both the energy and consumer staples sectors. Shares of McDonald’s (MCD) were steady this week after the company delivered earnings slightly ahead of analysts’ expectations. Procter & Gamble (PG) shares rose more than 2 percent on stronger-than-expected numbers. Johnson & Johnson (JNJ) reported earnings that beat estimates, but not revenues.

Verizon (VZ) shares fell after the company missed growth estimates, but shares of AT&T (T) rallied after meeting expectations, leaving the telecom sector flat. Starbucks (SBUX) fell on Friday after the firm disappointed investors. The company spent heavily on upgrading technology and overseas expansion.

On Wednesday, Boeing (BA) beat Wall Street forecasts and saw its share price rise more than 7 percent. Shares of Caterpillar (CAT) fell more than 2 percent as the company reported a record 49 straight months of declining sales. The company also cut its 2017 outlook, though shares gained on the week following the infrastructure trade. United Technologies (UTX) traded down and Honeywell (HON) up following earnings reports, but it was an overall up week for industrials. SPDR Industrials (XLI) hit a new all-time high after gaining nearly 2 percent.

Technology earnings were mostly positive. Google parent Alphabet (GOOG) fell after tax charges caused the company to miss earnings estimates. Microsoft (MSFT) beat estimates across the board and shares popped 2 percent. Intel (INTC) followed MSFT higher following a similarly strong report. Shares of EBay (EBAY) also rallied after it hit estimates and reported its best earnings growth in nearly 2 years.

Ford (F) reported an $800 million loss in the last quarter and did not provide clear guidance going forward. Shares fell following the news, but were up for the week.

Chevron (CVX) reported 22 cents versus expectations of 64 cents per share. Shares fell to near 2-month lows as a result. Earlier in the week, oil services giant Halliburton (HAL) beat estimates, while competitor Baker Hughes (BHI) missed. Colgate (CL) hit earnings, but missed sales estimates, sending shares down 6 percent.

ETF & Mutual Fund Watchlist for January 25, 2017

The Dow Jones Industrial Average finally broke through the 20,000 level today on a nice rise in volume. The Nasdaq and S&P 500 Index, which were already in record territory, also climbed substantially on Wednesday.  The Russell 2000 is still below its all-time high, but closing in fast on a new record.




General Electric (GE) kicked things off on Friday, hitting estimates, but missing on revenues due to weakness in its oil services business. Caterpillar (CAT) reports tomorrow. Today, CAT announced declining monthly sales for the 46th consecutive month, but shares rallied on hopes that Congress will pass an infrastructure bill. Rockwell Automation (ROK) beat earnings and sales estimates, sending shares sharply higher. Illinois Tool Works (ITW) beat earnings and met sales estimates.

A sub-component of the industrial sector, aerospace and defense companies are reporting in bulk this week. Boeing (BA) beat both earnings and revenue estimates, but shares of defense contractors such as Lockheed Martin (LMT), who reported strong earnings and delivered positive guidance, slipped.








Consumer discretionary and technology both pushed to new highs this week. Technology companies reporting this week include Alphabet (GOOG), Microsoft (MSFT) and Intel (INTC). Investors have bid shares up in anticipation of strong reports.






Verizon’s earning and subscriber growth disappointed investors, sending shares down 4 percent on Tuesday. The loss sent iShares U.S. Telecommunications (IYZ) down 0.7 percent. Vanguard Telecommunications (VOX) has double the exposure to VZ and fell 1.4 percent.



WisdomTree US Dollar Bullish (USDU)
PowerShares DB US Dollar Bullish (UUP)

The key level to watch in the week ahead is 100 on the U.S. Dollar Index. A break below would open the index up for a correction down to about 97. This would not threaten the long-term bull market, but might keep the dollar in a trading range until the spring.



Energy is one of the few sectors that hasn’t broken out to upside. Crude inventories rose more than expected this week, shale oil rig counts are rising sharply, despite bullish market sentiment.

The best performing energy stocks this week are those tied to energy infrastructure. JPMorgan Alerian MLP Index (AMJ) spiked on news that the Keystone and Dakota pipelines are moving forward. These firms can benefit from increased energy production and activity in the United States even if energy prices remain low.





LIBOR and 3-month LIBOR steadied in the past week, but the 10-year Treasury yield started climbing again. An upside breakout in interest rates would impact both bonds and stocks.

Fidelity Floating Rate High Income (FFRHX), PowerShares Senior Loan (BKLN) and RidgeWorth Seix Floating Rate High Income (SAMBX) held steady for another week, while Thompson Bond (THOPX) continued to advance.

On Friday, the government will announce the first estimate of 2016 Q4 GDP growth. Economists’ consensus forecast calls for 2.2 percent growth, but the Atlanta Federal Reserve’s GDP Now Model is calling for 2.8 percent growth. Look for GDP growth to surprise on the upside.








ETF Investor Guide for January 2017

The January ETF Investor Guide is NOW AVAILABLE! Click Here to view.  Links to the Data Files can be found below. Market Perspective: ETFs with Targeted Objectives Excelled in 2016 […]