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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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The Week In Review

9/15/17

Equities ticked up on Friday, capping off this week's run to record highs on a positive note. The Dow (+0.3%) advanced to a new-all time high once again, as did the S&P 500 (+0.2%), which settled right at the round mark of 2,500. The Nasdaq (+0.3%) also finished modestly higher, but didn't gain enough to erase its Thursday decline, leaving the index about 12 points below its record-high close. For the week, the S&P 500 added 1.6%.

On one hand, Friday's uptick was surprising considering that it came on the heels of yet another North Korean missile launch, which crossed over the northern Japanese island of Hokkaido. However, on the other hand, the market's response was entirely consistent with the recent past as investors have generally taken Pyongyang's missile tests in stride.

Eight of the eleven sectors advanced on Friday, with the lightly-weighted telecom services group (+1.8%) leading the charge by a wide margin, securing its spot at the top of the week's leaderboard (+3.9%). The financials (+0.5%) and energy (+0.2%) sectors also outperformed on Friday, finishing the week on telecom's heels with weekly gains of 3.3% and 3.5%, respectively.

The top-weighted technology sector (+0.3%) broke its two-day losing streak, thanks in large part to chipmakers, which sent the PHLX Semiconductor Index (+1.7%) higher for the fifth day in a row. NVIDIA (NVDA 180.11 +10.71) led the semiconductor rally, climbing 6.3% to a new all-time high, after its target price was raised to $250 from $180 at Evercore ISI on Friday morning.

Apple (AAPL 159.88, +1.60) also played a major role in the tech sector's positive Friday performance, snapping out of its recent funk, which started immediately following the company's annual product event on Tuesday. The tech titan climbed 1.0% to settle with a weekly gain of 0.8%.

On the flip side, Oracle (ORCL 48.74, -4.05) dropped 7.7%, giving back all of its September gain, after issuing cautious guidance that overshadowed its better-than-expected earnings and revenues.

The health care (-0.3%) and consumer discretionary (-0.2%) spaces were the weakest sectors on Friday, trimming their weekly gains to 0.4% and 0.9%, respectively. Meanwhile, the rate-sensitive utilities group (+0.1%) eked out a narrow victory, but its Friday performance was far from enough to prevent a last place finish in the weekly sector standings (-0.4%).

In the bond market, U.S. Treasuries didn't do much to relieve the huge weekly losses they carried into Friday's session. The yield on the benchmark 10-yr Treasury note finished flat at 2.20%, locking in a 14 basis point gain for the week. Meanwhile, the 2-yr yield climbed two basis points to 1.38%, extending its weekly gain to 13 basis points.

Reviewing Friday's big batch of economic data, which included August Retail Sales, August Industrial Production & Capacity Utilization, the preliminary reading of the University of Michigan Consumer Sentiment Index for September, the September Empire State Manufacturing Index, and July Business Inventories:

  • August retail sales decreased 0.2%, missing the Briefing.com consensus estimate, which called for an increase of 0.1%. The prior month's reading was revised to +0.3% from +0.6%. Excluding autos, retail sales increased 0.2% while the Briefing.com consensus expected an increase of 0.5%. The prior month's reading was revised to +0.4% from +0.5%.
    • The key takeaway from the report is that it will temper forecasts for Q3 consumer spending as core retail sales, which exclude auto, gasoline station, building equipment and materials, and food services and drinking places sales, declined 0.2%.
  • Industrial Production decreased 0.9% in August (Briefing.com consensus +0.2%) while Capacity Utilization declined to 76.1% (Briefing.com consensus 76.8%) from a revised reading of 76.9% in July (from 76.7%).
    • The key takeaway from the report is that industrial production, excluding the hurricane impact, was still weak in August.
  • The preliminary reading of the University of Michigan Consumer Sentiment Index for September declined to 95.3 (Briefing.com consensus 95.5) from 96.8 in August.
    • The key takeaway from the report is that consumers' assessment of their financial situation is the best it has been in more than a decade.
  • The Empire Manufacturing Survey for September declined to 24.4 from the prior month's reading of 25.2. The Briefing.com consensus estimate was pegged at 20.0.
  • Business Inventories rose 0.2% in July, which is in line with the Briefing.com consensus. The prior month's reading was left unrevised at +0.5%.
    • The key takeaway from the report is that pricing power will still be hard to come by given the elevated inventory-to-sales ratio, which held steady at 1.38 (down from 1.40 a year ago).

On Monday, investors will receive just one notable piece of economic data--the NAHB Housing Market Index for September--which will cross the wires at 10:00 ET. 

  • Nasdaq Composite +19.8% YTD
  • Dow Jones Industrial Average +12.7% YTD
  • S&P 500 +11.7% YTD
  • Russell 2000 +5.5% YTD

Week In Review: Movin' On Up

Stocks rallied to new record highs this week--more than making up for last week's decline--following Hurricane Irma's weaker-than-expected Florida landfall and ahead of next week's FOMC meeting. The Dow led this week's advance, climbing 2.2%, followed by the S&P 500 (+1.6%), and then the Nasdaq (+1.4%). For the year, the S&P 500 now holds a gain of 11.7%.

The bulk of this week's gain came right off the bat as investors happily dialed back their estimates on Monday for damages related to Hurricane Irma, which quickly petered out after hitting the Florida Keys on Sunday. Insurers like Travelers (TRV) led the Monday rally, underpinned by the prospect of fewer-than-expected hurricane related claims, but much of their gains were unwound by the end of the week.

Equities followed up their stellar Monday performance with another win on Tuesday, but conviction was much more modest. Apple (AAPL) held its annual product event, in which the company unveiled a trio of iPhones, including the iPhone 8, the iPhone 8 Plus, and the high-end iPhone X--which CEO Tim Cook called "the biggest leap forward since the original iPhone."

On the whole, Tuesday's product event provided little new information as many of the details had been leaked beforehand. Apple sold off immediately following the event, with some investors citing concerns related to the iPhone X's later-than-expected release date (November 3). However, the tech giant bounced back on Friday, extending its massive year-to-date gain to 38.0%.

Following Tuesday's modest victory--which sent all three major U.S. indices to new record highs--the stock market took a breather, ending the week in a sideways trend. The Nasdaq ticked lower in the latter half of the week, settling just a step below its record high, while the S&P 500 and the Dow ticked up, further extending their record marks.

Investors largely ignored North Korea's latest missile launch, which flew over northern Japan on Friday morning, continuing the week's safe-haven sell off. After hitting a 10-month low last week, the yield on the benchmark 10-yr Treasury note climbed 14 basis points this week, settling at 2.20%. Meanwhile, the 2-yr yield climbed 13 basis points to finish at 1.38%.

A hotter-than-expected August CPI reading (+0.4% actual vs +0.3% Briefing.com consensus), which showed a year-over-year increase of 1.9%, prompted an adjustment in rate-hike expectations. According to the CME FedWatch Tool, investors currently place the chances of a December rate hike at 57.8%, up from last week's 31.0%. 

However, the Fed's massive balance sheet will be the focus of next week's FOMC meeting as it is widely expected that Fed Chair Janet Yellen will announce the start of a gradual reduction of assets bought in response to the 2008 financial crisis. The two-day FOMC meeting will kick off on Tuesday.