Market Perspective for September 5, 2017

Stocks opened the week choppy as geopolitical concerns in North Korea and another wave of hurricane activity contributed to volatility.

Isolated pipelines and refineries restarted this week, alleviating some of the weather-related supply concerns. Shares of U.S. Gasoline (UGA) fell more than 3 percent on Tuesday morning, while West Texas Intermediate crude oil climbed towards $49 a barrel.

The 10-year and 5-year Treasury bond yields broke to new 2017 lows. Bank stocks have tracked the movement in these yields over the past year. Speculators in the futures market put the odds of a December rate hike at 36 percent on Tuesday.

Factory orders fell 3.3 percent in July. Leaving out aircraft, orders climbed 1 percent. Analysts expected the dip following a surge in June orders for Boeing (BA) aircraft that inflated June orders. Services PMIs, revised productivity and unit labor costs for the second quarter, plus wholesale inventories and consumer credit in July will be out later this week.

The Bank of Canada will meet on Wednesday. Economists expect rates will remain steady at 0.75 percent. China’s trade data will be out on Friday. Chinese consumer and producer price data is tentatively scheduled for Friday.

We are in the quiet period for earnings season. Major reports this week will include Donaldson Company (DCI), Barnes & Noble (BKS) and Kroger (KR) on Friday. The latter may be the most important earnings report this week as investors contemplate Amazon’s (AMZN) entry into supermarkets. Kroger stock has fallen 25 percent since Amazon announced its purchase of Whole Foods.

iShares U.S. Aerospace & Defense (ITA) fell on merger news after United Technologies (UTX) announced it will buy Rockwell Collins (COL). UTX is 7.81 percent of ITA and COL is 4.32 percent. As is usually the case, shares of the acquirer fell and the target rose, weighing on the fund. Investors in ITA have seen no change in the makeup of the fund, but the UTX buyout has lightened its value. Shares of companies involved in missile defense, such as Raytheon (RTN and Lockheed (LMT), have rallied in response to North Korean hostility.

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