Download Weekly-Update-10-28-16

Weekly Update
DOW JONES
NASDAQ
S & P 500
RUSSELL 2000
10-YEAR NOTE
OIL
GOLD
October 28, 2016
Today’s Close
Weekly Change
YTD Change
YTD % Change
18,162
5,190
2,126
1,187
1.85%
$48.71
$1,279
+17 Pts.
-67 Pts.
-15 Pts.
-30 Pts.
+11 Bps.
-$2.14
+$11.00
+737 Pts.
+183 Pts.
+82 Pts.
+51 Pts.
-42 Bps.
+$11.67
+$218.00
+4.23%
+3.65%
+4.01%
+4.49%
+5.35%
+31.51%
+20.55%
STOCKS CLOSE AT LOWEST LEVEL SINCE JULY 1ST.
EARNINGS ARE BEATING LOWERED EXPECTATIONS.
MERGERS AND ACQUISITIONS DOMINATE FINANCIAL NEWS MEDIA.
GDP REPORT SHOWS SPIKE, BUT DATA MISLEADING.
S & P 500 INDEX – PREVIOUS TWELVE MONTHS
The overall financial markets remain on “hold” until we get the U.S. presidential election over. Even
earnings reports are not moving the total market. There are moves by individual stocks, but we continue
to go back and forth in a narrow range. OPEC continues to talk about curbing production, but oil analysts
don’t think much is going to happen and prices will remain around the $45 to $50 barrel range. The
Dollar keeps hovering at the top end of its recent range and makes analysts nervous about a stronger
Dollar and what it can do to multi-national corporate earnings. Finally, the GDP report for Q3 came in at
2.9%, but economists are talking it down due to accounting irregularities tied to exports. Factoring in
this report, real GDP growth has averaged just 1.7% in 2016. The stock market will most likely stay in its
recent range until we get this presidential election over.
ECONOMIC DATA -- The good news of the week was the uptick in GDP for the 3rd quarter. The number
was 2.0% vs. 1.4% in the 2nd quarter. Consumer Confidence declined to 102.0 vs. 104.1. New Home
Sales declined 2%. Jobless Claims fell 3,000 to 258,000. Durable Goods Orders fell -0.1%, extransportation +0.2%. Pending Home Sales rose 1.5%. Q3 GDP-Adv. +2.9% vs. 1.4%. The U of M
Consumer Sentiment Index fell to 87.2 vs. 87.9. The economy saw an improvement in GDP, but
revisions will most likely move it lower over the next couple of months.
STOCK MARKET – Hundreds of earnings reports have been released. ***********For the week, the
Dow Jones was higher by 17 pts. (+0.09%), Nasdaq was down by 67 pts. (-1.27%), and the S & P
500 fell by 15 pts. (-0.70%) ************ Companies that showed good results include: Merck,
Procter & Gamble, Apple, General Motors, Apple, Boeing, Google, Amazon.Com, Ford, BristolMyers, Chevron, and Exxon Mobil. Those that did not report as well or guided lower include: Visa,
Kimberly-Clark, Caterpillar, 3M, Eli Lilly, and Samsung. AT&T is buying Time Warner for $85
billion. Qualcom is buying NXP Semiconductor. Twitter continues to be discussed as a company for
sale. *********For the year-to-date, the Dow Jones is up 737 pts. (+4.23%), the Nasdaq is higher by
183 pts. (+3.65%), and the S & P 500 Index is up 82 pts. (+4.01%). ********** We will most likely see
more of the same over the next couple of weeks before the presidential election.
BOND MARKET – The bond market is going down in price, up in yield. You can see from the chart
below, we are back to the highs in yield from last May. For the week, the 10-year note closed up 11
bps. to 1.85%. The 2-year note closed at 0.88%. The Dollar is holding its gains. The Euro closed at
1.09, the Pound at 1.22, and the Yen at 103.93. Oil prices keep hovering around the $50 barrel level.
Brent Crude closed the week at $50.85 barrel. Gold prices are stable, closing the week at $1,268 ounce.
The Fed is expected to increase rates in December. The bond market will keep pricing in that expected
move over the next few weeks.
10-YEAR NOTE YIELD – PREVIOUS TWELVE MONTHS
DOLLAR INDEX -- PREVIOUS TWELVE MONTHS
ASSET CLASSES – Total returns for the major fund categories, year-to-date, as of last night, are as follows:
Large Cap Growth
Large Cap Value
Mid Cap Growth
Mid Cap Value
Small Cap Growth
Small Cap Value
0.67%
7.52%
1.07%
8.30%
1.21%
9.01%
Short Term Bonds
Intermediate Bonds
Municipal Bonds
International Funds
Real Estate Funds
Balanced Funds
2.30%
7.61%
2.11%
1.79%
2.66%
5.26%
SUMMARY – The GDP report of +2.9% released this morning was a welcome surprise as it was the
strongest reading in two years. However, economists are “walking” the number back with a 10% spike in
soybean exports, which added 0.9% to the number and will be reversed next quarter. To quote a major
economist, “The BEA does not actively measure farm inventory quarter-to-quarter; instead, they
interpolate annual estimates from the USDA. But they have the ability to over-ride that method in
unusual circumstances to maintain the integrity of the overall national accounts; we’re at a loss to
know why they haven’t done that this time”. And so the political season continues. With this report,
GDP has shown 1.7% growth for 2016. Earnings season is in full force, with most companies doing a
good job at beating their lowered guidance. The range for the overall stock market will remain in check
until we get the U.S. presidential election over and corporate America will have a better handle on what
they can do with regard to spending and business investment going forward to grow their companies
bottom line. Additionally, central banks seem to be trying to rein in easing expectations, currency
volatility, and interest rate movements. As we have said many times, the market is looking for a new
catalyst and it can’t seem to find one.
Have a great weekend.
Denny Blodgett
Intersect Capital LLC