Market Perspective for August 11, 2017

The Dow Jones Industrial Average declined 1.05 percent on the week, the NASDAQ 1.50 percent and the S&P 500 1.43 percent. Vanguard Consumer Staples (VDC) increased 0.15 percent alongside other value stocks, while FANG shares Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL) declines pulled SPDR Technology down 2.0 percent on Thursday.

Disney’s (DIS) decision to cut ties with Netflix to launch its own streaming service contributed to the Nasdaq’s losses. Shares of both companies fell following Wednesday’s announcement. It was also a challenging week for brick-and-mortar retail earnings, with Macy’s (M), J.C. Penney (JCP) and Nordstrom (JWN) seeing their shares slide after reporting.

The Dow Jones Industrial Average has consistently outperformed since July 24. Consumer staples, financials, utilities and telecom have led performance. Within the industrial sector, Dow components Boeing (BA), 3M (MMM) and Caterpillar (CAT) have also outperformed.

Productivity increased 0.9 percent in the second quarter, exceeding the consensus forecast of 0.6 percent. Unit labor costs were lower than expected at 0.6 percent. Wholesale inventories increased 0.7 percent in June, a positive for the second-quarter GDP revision at the end of August. Weekly unemployment claims remain near 44-year lows.

Small business optimism beat expectations in July. Job creation plans, job openings, better business conditions and higher sales expectations all lifted the sentiment index put out by the National Federation of Independent Business’s sentiment index.

Commodities and commodity-related stocks fell this week in response to disappointing inflation data. The producer price index (PPI) fell 0.1 percent, the consumer price index (CPI) increased 0.1 percent and the core CPI rose 0.1 percent. Economists were expecting the PPI to rise 0.2 percent and both CPIs to climb 0.2 percent.

Chinese commodity futures slid on Friday following weaker inflation data in China. Commodity weakness weighed on emerging markets, sending iShares MSCI Emerging Markets (EEM) down 2.25 percent.

On Thursday, agricultural futures fell after the U.S. government forecast big global harvests.

The 10-year Treasury yield slid to 2.19 percent on Friday and the U.S. Dollar Index fell 0.3 percent.

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