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Markets Ignoring Politics

Markets tuned out noise from Washington last week and continued to focus on economic fundamentals. Mildly rebounding retail sales and strong consumer sentiment seem to point toward a modestly stronger second quarter.[i]

After a three-week winning streak, both the Dow and S&P 500 reported slight losses.[ii] The Dow closed with a 0.53% loss, and the S&P 500 reported a 0.35% decline for the week.[iii] The NASDAQ, however, rose 0.34% while the MSCI EAFE reported a modest 0.16% gain.[iv]

MIXED SIGNALS CONTINUE

  • Soft retail earningsAdidas shoes | Air Jordan 1 Mid "Bling" Releasing for Women - Pochta

Consumer retail purchases were up after a first-quarter decline. Sales rose by 0.4% (just shy of the 0.6% consensus), and 9 of the 13 retail categories posted gains.[v]  As expected, early second-quarter gains suggest the first-quarter decline was just a blip.[vi]

  • Continuing concerns over store closings

A report last month concluded that in excess of 8,600 brick-and-mortar stores could close in 2017 due to poor sales. Last year, at least 2,000 stores shut their doors, while just over 5,000 closed in 2015. The record for store closings occurred in 2008 when over 6,000 stores closed.[vii]

  • Strong consumer sentiment

Despite modest retail sales, consumer confidence reached a 4-month high.[viii] Consumer expectations are positive regarding job growth, income, and low inflation.[ix] Furthermore, 44% of surveyed consumers expressed optimism in their financial prospects—the highest percentage since 2004.[x]

The consumer price index rose 0.2% in April, in line with expectations for the month.[xi] However, the medical care and communications sectors saw continuing price weakness.[xii]

LOOKING AHEAD

This week, we will look forward to data regarding the strength of the housing market. Though the highest percent of consumers in over 10 years report positive opinions on selling homes, next week’s numbers will give us a better idea of where the markets stand.[xiii] Finally, the market will continue to watch oil prices, which steadied this week after three weeks of decline.[xiv]

In the weeks ahead, possible corporate tax rate reductions and potential trade policy changes will remain in focus for markets. In addition, markets will remain interested in the Fed’s interest rate plans and its plan to reduce its $4.5 trillion balance sheet.[xv]


As always, I will continue to track the impact of international and domestic political news on the markets and the economy.

ECONOMIC CALENDAR

Monday: Housing Market Index

Tuesday: Housing Starts, Industrial Production

Wednesday: EIA Petroleum Status Report

Friday: Philadelphia Fed Business Outlook Survey

DATA AS OF 5/12/2017 1 WEEK SINCE 1/1/17 1 YEAR 5 YEAR 10 YEAR
STANDARD & POOR'S 500 -0.35% 6.79% 15.83% 12.05% 4.73%
DOW -0.53% 5.74% 17.92% 10.26% 4.60%
NASDAQ 0.34% 13.71% 29.21% 15.85% 9.10%
INTERNATIONAL 0.16% 10.92% 13.52% 5.28% -1.80%
DATA AS OF 5/12/2017 1  MONTH 6  MONTHS 1  YEAR 5  YEAR 10  YEAR
TREASURY YIELDS (CMT) 0.69% 1.03% 1.11% 1.85% 2.33%

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5- year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index.  Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

 


[i]http://wsj-us.econoday.com/byshoweventfull.asp?fid=477711&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[ii]http://www.cnbc.com/2017/05/12/us-markets.html

https://www.bloomberg.com/news/articles/2017-05-12/gain-in-u-s-retail-sales-suggests-slowdown-was-temporary

[iii]http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

[iv]//performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO">http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO>

https://www.msci.com/end-of-day-data-search

[v]http://wsj-us.econoday.com/byshoweventfull.asp?fid=477711&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

https://www.bloomberg.com/news/articles/2017-05-12/it-s-back-to-steady-for-u-s-economy-as-retail-sales-cpi-rise

[vi]https://www.bloomberg.com/news/articles/2017-05-12/gain-in-u-s-retail-sales-suggests-slowdown-was-temporary

[vii]http://money.cnn.com/2017/04/22/news/credit-suisse-retail/

[viii]https://www.bloomberg.com/news/articles/2017-05-12/four-month-high-in-u-s-consumer-sentiment-to-sustain-spending

[ix]http://wsj-us.econoday.com/byshoweventfull.asp?fid=477843&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[x]https://www.bloomberg.com/news/articles/2017-05-12/four-month-high-in-u-s-consumer-sentiment-to-sustain-spending

[xi]http://wsj-us.econoday.com/byshoweventfull.asp?fid=477394&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[xii]https://www.bloomberg.com/news/articles/2017-05-12/rebound-in-u-s-consumer-prices-shows-inflation-stabilizing

[xiii]https://www.bloomberg.com/news/articles/2017-05-12/four-month-high-in-u-s-consumer-sentiment-to-sustain-spending

http://wsj-us.econoday.com/byshoweventfull.asp?fid=477675&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[xiv]http://www.cnbc.com/2017/05/11/oil-stable-on-expectations-of-extended-opec-led-production-cut.html

[xv]http://www.cnbc.com/2017/03/15/fed-raises-rates-at-march-meeting.html

http://www.reuters.com/article/usa-fed-evans-idUSS8N1F901E

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