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Weekly Market Commentary

July 9th – July 13th

Producer Prices at wholesalers and retailers are showing signs of pressure in light of increased tariffs.  Year-on-year PPI for June was higher than anticipated at 3.4%.  Core PPI, excluding food and energy, was also higher than consensus at 2.8%.  Consumer prices edged up more modestly showing a continued lack of pricing power for producers.  Year-on-year CPI was in line with consensus at 2.9% and the Core reading was a tick above expectations at 2.3%.  The only signs of price pressure came from medical care and rents.  The readings continue to inch higher, providing the Fed a modicum of cover for tighter rate policy.  Import prices however, pulled back in June after initial spikes in steel and aluminum prices following the initial tariff imposition in March.

The JOLTS job openings report slipped modestly in May while the already strong April figures were revised upward.  Openings continue to outpace hirings and remain larger than the number of active job seekers.  The abundance of openings in April is starting to pull discouraged workers back into the job market to even the balance between job seekers and opportunities, but the skills mismatch remains. 

Consumer credit through May jumped to the highest level in 2018.  Total credit increased by $24.6B, well ahead of estimates, and the prior month was revised upward by $1.0B.  The slowdown in credit card usage after the holiday shopping season appears to be over, despite the fact that credit card rates are at multi-year highs. 

The yield on the 10-Year U.S. Treasury traded within a narrow range of 2.81-2.87%, closing the week at 2.83%.  The spread between the 2-Year and 10-Year Treasuries tightened further to an extremely narrow 24 basis points.  The term premium for bond investors to extend maturity has all but evaporated. 

U.S. stocks rose straight through the initial trading session of the week following continued strength on the employment front reported last week.  Investors’ concerns about trade tensions eased for most of the week as focus shifted to expectations of a strong Q2 earnings season.  The S&P 500 closed the week with a gain of 1.5% at 2,801.  The technology heavy NASDAQ broke further into record territory closing at 7,825 and the Dow edged back above the 25,000 mark. 

Notable economic releases next week include Retail Sales, Industrial Production, Housing Starts and regional manufacturing surveys.


Weekly Market Commentary

June 25th-June 29th

The final estimate of Q1 GDP came in at a disappointing 2.0% from 2.2%, revised lower due to downward revisions of spending on services, net exports and inventories.  Despite being higher than the Q1 print of the prior two years, the figure is below what we had expected.  Fortunately, second quarter economic growth is shaping up to be far stronger than the first which we expect to surpass 3%.  Personal Consumption Expenditures (PCE) came in modestly higher than expected at 2.3% on a year-on-year basis.  The Core reading reached the Fed’s target of 2.0% for the first time in six years. 

Manufacturing Indices reported predominantly weaker than anticipated results perhaps predicated on the expectation of future strains from tough trade talk out of Washington.  Bloomberg National Economic Expectations remain near multi-year highs, but the Conference Board U.S. Leading Index has softened.  Markit Manufacturing PMI was softer than expected and the Chicago Fed National Activity Index disappointed, falling into negative territory.  Philly Fed reported lower than expected results as well.  The Dallas Fed Manufacturing Index was an outlier, exceeding expectations. 

Durable Goods orders showed promise despite softness at the headline level of -0.6% as anticipated, primarily due to tariff-related declines from metals.  Another build up in unfilled orders increases expectations for the next print. 

New Home Sales surprised to the upside for May coming in at 689k versus an estimated 667k.  The sale of lower priced starter homes jumped while high-end home sales dropped.  The combination led to a rare decline in median home prices.

Oil prices reached their highest level in over three years at over $74 per barrel based on concerns of supply reduction.  U.S. crude inventories were reported lower than expected at a time when U.S. sanctions on Iran are becoming increasingly concerning within the industry. 

The yield on the 10-Year U.S. Treasury shifted with the changes in risk on/off sentiment throughout the week, closing at 2.85%, only modestly below where it started.  The spread between the 2-Year and 10-Year Treasuries reached new cycle lows ending the week at an historically tight level of 32 basis points.

U.S. stocks pulled back sharply in the first trading session of the week on concerns of global trade tariff retaliation measures.  Profit taking in technology shares led the sector to sharp losses with more defensive sectors like Consumer Staples and Utilities receiving investor attention.  Investor sentiment vacillated throughout the week of up and down days culminating in a strong rally through the final trading day.  For the week, the S&P 500 regained some of the lost ground closing down -1.3% at 2,718.  The Chinese stock market has taken a meaningful hit for similar trade-related reasons, now in bear market territory. 

Notable upcoming economic releases include Nonfarm payrolls, ISM and PMI manufacturing data, Factory Orders and CPI, PPI inflation readings. 

Enjoy the July 4th holiday.  The next Market Commentary will be released on July 13th


Weekly Market Commentary

June 18th-June 22nd

Talk of trade tariffs dominated financial media headlines and investor sentiment throughout the week.  Volatility as measured by the VIX Index followed suit rising by 16% during the week.  The largest banks in the U.S. passed the government’s latest stress test appeasing some of the growing uneasiness.    

Housing Starts for May jumped to 1.35mm, ahead of the survey estimate, as residential projects delayed in April due to adverse weather pushed into the following month.  Multi-family housing under construction continues to be robust with ample new supply coming to market.  Residential building permits are starting to fall off however, perhaps somewhat impacted by a tightening labor market for skilled construction workers.  Existing Home Sales pulled back modestly again to 5.4mm as inventory of homes for sale remains tight while home prices continue to rise.  A low level of jobless claims is setting the stage for another strong employment report this month. 

The yield on the 10-Year U.S. Treasury eased back down to a low of 2.85% early in the week with investors’ flight to the safety of UST bonds.  The bellwether Treasury found its way back to a high of 2.94% before settling back at 2.89% to close the week.  Traders’ expectations between 3-4 Fed hikes in 2018 vacillated with the implied probability of a fourth hike now modestly below 50%.

U.S. equities sold off on trade uneasiness in a back and forth week in which the  S&P 500 finished nearly where it started, down -0.8% at 2,754.  The technology-heavy NASDAQ Index was able to reach a new record high midweek before profit takers pared back the gains in subsequent sessions.  The Dow was down for the week by -2% closing at 24,581.

Notable economic releases next week include the final estimate of Q1 GDP, Durable Goods Orders, New Home Sales and regional manufacturing indices.


Weekly Market Commentary

June 11th-June 15th

The G7 summit held over the weekend ended without a joint communication after President Trump disavowed the written statement.  Verbal jabs between the U.S. President and Canadian PM Trudeau ensued following the joint meeting causing concern for the direction of NAFTA renegotiations.  The U.S. - North Korea summit held in Singapore provided some positive photo op images and generally positive comments relating to further discussion of peace, diplomacy and disarmament.  Sanctions remain in place however, U.S. military exercises in South Korea are planned to halt, a step in the right direction toward negotiation and a large cost savings. 

CPI inflation data matched expectations with the headline reading of 2.8% on a year-on-year basis, the highest level since February 2012.  The Core reading, excluding food and energy prices was reported in line with estimates as well at 2.2%.  Producer Price Inflation (PPI) jumped 0.5% in May (3.1% y/y), more than expected given the 4.6% rise in total energy costs, including a 9.8% spike in gasoline costs.  Excluding food and energy, the Core PPI rose 0.3% (2.4% y/y).

Retail Sales for May exceeded projections rising 0.8%.   The slump in consumption from Dec. through Feb. (following the post-hurricane spike in Sep.-Nov.) has subsided with the third consecutive month of above trend sales growth.

The FOMC announced a 0.25% increase in the Fed Funds Rate as was widely expected to a target level of 1.75-2.00%.  Post meeting statement language was modestly more hawkish and a shift in the Committee members’ rate projections, known as the “dot plot”, now shows higher potential for four increases (rather than three) in 2018.  The probability of four hikes priced in by the futures markets spiked to over 50%.  The ECB met the following day declaring a tighter policy stance by stating that quantitative easing (QE) would end in Dec. 2018, with rate hikes not expected until Sep. 2019.  The ECB continues to follow the U.S. post-recession play book on monetary policy by pausing between the announcement of an end to QE and implementing rate hikes.

The yield on the 2-Year U.S. Treasury jumped through the 2.60% level following the Fed announcement and closed the week at 2.57%.  The 10-Year U.S. Treasury Yield momentarily ticked back through 3.0%, but closed back down at 2.92%.  The 2-10 Treasury spread touched a new cycle low signifying further flattening of the yield curve. 

Continued strength in the equity market led the S&P 500 to the highest close since February 1st at midweek. Subsequent profit taking led the index lower, closing within a point of where it started the week at 2,779.  The Russell 2000 Index of small cap stocks broke through a new all-time closing high record as well.   

Notable economic releases next week include Housing Starts and Existing Home Sales.  Financial journalists will be busy following FOMC Committee members around at their post meeting speaking engagements parsing individual opinions and comparing word selection.  We’ll read this less than enthralling detail so you don’t have to.     


Weekly Market Commentary

June 4th-June 8th

This was a light week for economic news. Factory Orders came in down 0.8 percent, below estimates due to weakness in aircraft orders. The less volatile ex-transportation number showed a 0.4% gain and slightly beat estimates. Durable Goods Orders ex-transportation were up a healthy 0.9%, outpacing estimates of 0.5% and supporting the outlook for a more robust period of consumption.

JOLTS Job Openings for April came in at 6.7 million, surpassing the number of unemployed workers (6.3 million) for the first time in this economic cycle. In addition, weekly jobless claims remained historically low at 222K. Both readings point to a tightening labor market on the heels of the 3.8 % unemployment reading. The favorable readings helped lift the probability of four Fed hikes this year back up to 37%.

One data point boosting equities was a monthly trade deficit that came in below expectations at -46.2 Billion. This report showed increased exports of key U.S. goods like soybeans, as well as a tightening of import purchases, and can be expected to be brought up in ongoing trade negotiations with China. The Fed also noted higher freight volumes and increased exports in their recent Beige Book report.

For the week, the S&P 500 was up a solid 1.62% to 2,779, while the U.S. 10-year T-Bill climbed 4 bps to 2.94 and the 2-10 spread remained fairly flat at 45 basis points.

Markets next week will be trading on news that comes out of this weekend’s G7 summit (where tariffs and trade policy will take center stage) and the June 12 U.S. summit with North Korea. We’ll also hear from the FOMC Wednesday, where the Fed Funds rate is almost certain to increase.


Weekly Market Commentary

May 29th – June 1st

Nonfarm payrolls exceeded expectations for May at 223k, above the 190k consensus, along with a net revision for the prior two months of +15k.  Headline unemployment reached a new multi-decade low of 3.8% and annualized wage growth hit the “Goldilocks” level of 2.7%.

The second estimate of Q1 GDP was revised modestly lower from 2.3% to 2.2% driven by softer than initially reported consumer spending. 

Personal Income rose in line with expectations in April increasing 0.3%.  Consumer spending exceeded the 0.4% expected increase coming in at 0.6% and the prior month 0.4% reading from March was revised up to 0.5%.  The trickle of U.S. consumption has the potential to turn into a more steady stream of spending this quarter.  The Personal Consumption Expenditures (PCE) inflation measure was in line with expectations at 2.0% year-on-year change and 1.8% for the Core reading. 

The 10-Year U.S. Treasury yield pulled back meaningfully early in the week driven by a flight to safety.  The yield curve flattened further with the 2-10 Treasury spread reaching 43 basis points, the lowest in over a decade.  Yields recovered somewhat as the week went on with the bellwether Treasury closing marginally lower for the week at 2.89%.  The probability of four rate hikes in calendar year 2018 priced in from the futures market fell from 45% to 10% this week.

Equity markets had a roller coaster holiday-shortened trading week.  Risk off sentiment prevailed in the initial session driven by political turmoil in Italy raising concerns about another European Union possible exit scenario.  After a one-day recovery, renewed concerns about trade tariffs and potential global retaliation sent stock indices back into the red followed by a strong final session after the strong employment report and easing concerns about EU turmoil.  For the week, the S&P 500 closed modestly higher, up 0.5% at 2,734.

Economic releases will be light next week, including Factory Orders and Consumer Credit.


Weekly Market Commentary

May 21st – May 25th

Durable Goods orders in April fell -1.7%, below the estimate of -1.2%.  Much of the decline was related to aircraft orders, down 29% in April after spiking over 60% in March.  Capital Goods orders excluding defense and aircraft rose 1.0%.  The rise in April is encouraging given the weakness in this reading during the first quarter.

New Home Sales for April of 662k were below consensus estimates of 677k, more of a slowdown than was expected after the particularly robust 694k in March.  Existing Home Sales were also weaker than expected for April at 5.45mm vs. an estimated 5.60mm.  Inventory of homes for sale is at the lowest level in years for this time of year.

Congress passed a bank regulatory relief bill with bipartisan support.  One of the key components redefined the “too big to fail” limit financial institutions were tagged with by Dodd-Frank from $50bn to $250bn, removing some of the onerous reporting requirements on smaller regional banks, giving them more of an opportunity to compete with the larger national banks. 

The FOMC minutes were released pointing to an expected rate hike in the June meeting, but struck a somewhat more dovish tone with respect to the inflation target of 2%.  Opinions were split as to whether inflation would hold at the target level or decline once reached.  Interestingly, no members expressed fear of inflation remaining above the 2% target for a sustained period of time.  A discussion on statement language going forward showed some members leaning away from using the word “accommodative” to describe policy, shifting to a more neutral stance.  “Concerns about the outlook for trade policy in the U.S. and abroad” was another notable comment attracting attention. 

The 10-Year U.S. Treasury yields vacillated along with risk, moving back below the 3% level as investors sought the safety of Treasuries as risk shifted off following the announced cancellation of the U.S. – North Korea summit.  For the week, the bellwether Treasury Bond yield decreased by 12 basis points to 2.93%.

The S&P 500 rallied in the first trading session of the week on news of easing trade tensions between the U.S. and China, with China promising to import more U.S. goods.  Heightened geopolitical concerns relating to North Korea reduced investors’ risk appetite later in the week.  For the week, the S&P 500 closed within a stone’s throw of where it started at 2,721.

Notable economic releases in the upcoming holiday-shortened trading week include a second estimate of Q1 GDP, Personal Income and Outlays, PMI and ISM Manufacturing and Employment data.


Weekly Market Commentary

May 14th – May 18th

Retail Sales met modest expectations for April, increasing 0.3%.  The headline result matched the ex-autos and ex-gas figures at 0.3%, marginally trailing consensus estimates.  The March figure was revised upward to a more favorable reading of 0.8%.  Gasoline Stations were a standout in the report, up for nine consecutive months with 11.7% year-on-year sales growth.

The latest report of business inventories was flat at 0.0%, below the 0.2% estimate and 0.6% prior reading.  The pullback is likely to impact the second estimate of Q1 GDP given the positive lift from inventories in the initial GDP report.  The April Industrial Production report came in at 0.7%.  The figure includes a solid 0.5% gain for manufacturing.  Regional manufacturing indices from Philly Fed and Empire State exceeded expectations as well. 

The Continuing Jobless Claims report showed the lowest number of Americans receiving unemployment benefits since 1973.  Layoffs are becoming increasingly rare as the labor market continues to tighten.  The average time to fill a job vacancy surpassed 30 days for the first time in two decades. 

A significant increase was reported in the number of active wells in shale oil fields outside of the Permian basin in the U.S.  Exploration and Production companies have quickly increased fracking in response to rising oil prices.  Rig Counts remained steady, but downward pressure on oil prices is in the cards.

Rising Treasury yields continue to push up mortgage rates.  The average 30-year fixed mortgage rate in the U.S. hit a seven-year high of 4.6%.  The combination of benign wage growth, rising home prices and higher financing costs will start to squeeze first time homebuyers out of the market.  Mixed results were reporting in housing data with Housing Starts missing consensus estimates and Building Permits meeting expectations. 

The 2-Year Treasury yield continued to reach multi-year highs at 2.54%.  The 10-Year U.S. Treasury yield reached 3.12% in intra-day trading, the highest level since 2011, before closing at 3.05% in the final trading session.  The spread on the long end of the yield curve between the 10-Year and 30-Year Treasury stands at a historically low 0.14%.  

The S&P 500 recovered some of the early week losses incurred in the first two trading sessions, but closed the week lower by 0.5% at 2,712.  Small cap stocks, with revenues derived primarily domestically, outpaced large cap stocks as rising rates have led to dollar strengthening.

Notable economic releases next week include New and Existing Home Sales and Durable Goods Orders along with the release of FOMC meeting minutes. 


Weekly Market Commentary

May 7th – May 11th

Producer Prices rose a modest 0.1% in April, below the consensus estimate of 0.2%.  On a year-on-year basis PPI inflation slowed from 3.0% to 2.6% led by a decline in food prices.  The Core reading, ex-food and energy, slowed from 2.7% to 2.3%.  The only inflationary detail coming through in the benign report was in transportation and warehousing where a shortage in truck drivers has resulted in wage increases passing through.  The Consumer Price Index rose only modestly as well at 0.2% for April, below the 0.3% consensus with the Core measure reported at 0.1%, the lowest since November.  On a year-on-year basis, CPI was 2.5% and the Core 2.1%, in line with the prior monthly reading.  Inflation hawks found little to screech about in either report. 

Consumer credit was softer than expected in March.  Increasing interest rates on outstanding balances is incentivizing consumers to begin to pay down card balances.  This is good news for the health of personal balance sheets, but a headwind to personal consumption if continued. 

The JOLTS (jobs) report showed roughly the same amount of unemployed workers (6.3mm) as available jobs (6.5mm) for the first time, underscoring the tightening of the labor market. 

Oil prices rose following President Trump’s announcement that the U.S. is backing out of the Iran nuclear accord along with declining inventory reports.  Crude broke through the $70 per barrel level for the first time since 2014. 

Short-term Treasury yields extended further reaching new multi-year highs.  The 2-Year U.S. Treasury yield increased to 2.53%.  The 10-Year U.S. Treasury yield closed the week at 2.96% leaving the 2-10 spread at the flattest level in a decade at 0.43%.  The 2-30 spread is not much higher at 0.55%.

The S&P 500 rose during the week at the tail end of a favorable Q1 corporate earnings season.  The index closed the week up 2.4% at 2,727.  Calm inflation reports and a decline in overall market volatility helped the Dow to hold up its seventh consecutive day of gains, the longest streak since February. 

Notable economic releases next week include Retail Sales, Housing Starts and Industrial Production.  The weekly Baker-Hughes Rig Count report will have more eyes on it than usual for signs of crude exploration and production increases at current higher price levels. 


Weekly Market Commentary

April 30th – May 4th

Personal Consumption Expenditures (PCE) came in as expected at 2% on a year-on-year basis.  The Core reading, excluding food and energy, increased to 1.9%, just below the Fed’s 2% target level.  Higher hospital costs along with increased Medicare and Medicaid expenses (after Congress ended the bundling requirement) were contributing factors.  Decreasing prices of cell phone service plans from last March rolling off the 12-month figure also factored into the increase.

Unemployment decreased more than expected after holding steady at 4.1% for six months to 3.9%, the lowest since December 2000.  Wage growth came in just below expectations at 2.6% on an annual basis, but likely “just right” for more volatile markets with eyes wide open for signs of inflation.   Modest wage growth could very well be a factor of a mismatch between available workers and employer skill requirements.  We would expect the tightening labor market to drive wages higher further into the calendar year.  April nonfarm payrolls rose just 164k, under the consensus estimate, but net net about in line with expectations when factoring in the incremental 31k added to the revised March figure.  Employers have added jobs every month since October 2010, a 91 month period of growth that stands as the longest on record. 

Manufacturing activity slowed modestly in April as measured by ISM and some of the regional surveys, but remains in expansionary territory.  While U.S. factory activity remains robust, manufacturers may be uneasy about trade policy threats.  The “backlog of orders” component of the ISM report rose, suggesting tight labor market conditions may also be a factor. 

The 10-Year U.S. Treasury yield moved back below the notable 3% level surpassed last week.  The benchmark Treasury closed the week where it started at 2.95%.  The FOMC left rates unchanged during their midweek meeting and towed a very similar line in terms of inflation and growth expectations, perhaps with a bit more hawkish tone.

The S&P 500 finished the week at 2,663, marginally lower than where it started.  Stocks were mixed in and up and down week, failing to make any headway despite a broad-based rally in the final trading session on Friday. 

Notable economic releases next week include the Consumer and Producer Price Indices, Consumer Credit and Import and Export Prices.


Weekly Market Commentary

April 23rd – April 27th

The initial reading of first quarter GDP exceeded expectations increasing at a 2.3% annual rate. Personal consumption, the largest component of GDP matched estimates of 1.1% but marked the smallest gain since 2013.  Transitory components that were headwinds a quarter ago boosted the headline number. Trade added 0.2% while inventory investment contributed 0.4%.  Despite the deceleration of economic expansion in the quarter, we are maintaining our base case of 3% GDP growth for 2018.

Regional manufacturing surveys produced mixed results for the month of March.  Kansas City manufacturing matched its highest level in survey history while Richmond manufacturing index posted its first negative (contracting) number since April of 2016. The national manufacturing figures-Chicago Fed National Activity survey, Markit PMI, and ISM painted a much clearer picture of continued expansion.

New orders for durable goods increased by 2.6% in the month of March, an index that has expanded four of the past five months.  Transportation equipment drove the results as commercial aircraft orders surged 44%.  Durable goods-ex transportation disappointed, remaining flat as demand for machinery and computers declined. 

The housing market rebounded as New Home Sales rose 4% in March and February sales were revised from -0.6% to 3.6%.  Existing home sales beat estimates of 0.2%, rising 1.1% to 5.6 million.  However, mortgage rates rising in parallel with the 10-Year U.S. Treasury will create a headwind once existing rate locks begin to roll-off. 

The yield on the benchmark 10-Year U.S. Treasury surpassed 3.0% for the first time in four years but treasuries rallied to finish the week at 2.96%.  The 2-year yield has more than doubled over the past 12 months, finishing the week at 2.48%. 

Company earnings dominated headlines as 147 of the S&P 500 constituents reported this week.  Despite the overwhelming number of positive earnings announcements, the S&P 500 closed largely unchanged for the week at 2,669. However, the market saw large movements from technology companies like Amazon, Facebook and Google as their earnings calls were digested.   

Notable economic releases next week include the PCE inflation figures and the unemployment report. 



Weekly Market Commentary

April 15th – April 20th

Retail sales improved in March.  However, the increases are unlikely to change the forecast for first quarter GDP growth of 2.0%.  Headline retail sales increased 0.6%, considerably above the -0.1% posted in February and the largest increase since November.  The retail sales control group, which is the direct input for GDP, increased by 0.4%, up from flat in February.  Consumption clearly slowed into the New Year, as the annualized quarterly change in the control group for the first quarter was only 0.8%, well below the rate of 10.4% posted in the fourth quarter.

The historically low level of housing inventory appears to have some relief on the way despite colder-than-average weather across much of the country.  Housing starts increased by 1.9%, and are now up 10.9% on a year over year basis.  Additionally, building permits increased by 2.5% in March, up 7.5% from year ago levels.  Increasing wages, lower taxes, an improving economy, and still historically low interest rates will likely lead to a continued high level of demand. 

Industrial production increased by 0.5%, exceeding the forecast of 0.2%.  The pace of growth was however, much slower than the 1.0% pace in February.  The acceleration in manufacturing activity was attributable to the strong finish in 2017, and time will tell if the threat of tariffs and potential global economic headwinds begin to slow the rate of growth in the coming months.

U.S. equities had a solid gain for the week through Thursday.  However, concerns of declining smartphone demand resulted in an IT sector decline, led by Apple and chip and hardware suppliers.  For the week, the S&P 500 closed higher by 0.5% at 2,670.

The yield on the benchmark 10-Year U.S. Treasury opened at 2.82%, and steadily increased to 2.93% to end the week.  The spread between the 2-Year and 10-YearTreasury widened slightly to 0.49%.  The shape of the yield curve is likely to remain “flat” for the quarter, as the Federal Reserve continues to target at least two additional rate increases this year and long-term rates are likely to remain capped by a below target rate of inflation and lower European and Japanese yields.

There are several notable economic releases next week including, first reading U.S. 1Q-18 GDP, Existing and New Home Sales, Durable Goods orders and the Markit U.S. Manufacturing PMI report.


Weekly Market Commentary

April 9th – April 13th

The Consumer Price Index (CPI) inflation measure was reported in line with expectations.  On a year-on-year basis headline CPI rose 2.4% and the Core (ex-food and energy) rose 2.1%.  The expected increase in the core rate from 1.9% the prior month is attributable to the index “breaking free from wireless drag” as a sizable price decline from cell phones fell off the year ago measure.  With Core CPI back above 2%, economists are more optimistic that the Fed’s preferred gauge of inflation, Core Personal Consumption Expenditures (PCE), may soon follow suit.  The Producer Price Index (PPI) was reported modestly higher than anticipated at 3.0% versus an estimated 2.9%. and 2.7% versus 2.6% consensus for the core reading.  Pricing pressures at the wholesale level have come from food and services including logistics services and software publishing.

U.S. equities had a strong start to the week into the initial trading session as global trade protectionist rhetoric quieted down over the weekend.  More headlines from Washington however, all but erased the gains late in the day as reports broke of an FBI raid on the office of President Trump’s personal lawyer Michael Cohen.  Geopolitical pressures resurfaced midweek with concerns of rising tensions between the U.S. and Russia over Syria.  Markets followed suit with the tenor of global headlines as has become far more common this calendar year.  Amid all the headline noise, first quarter 2018 earnings season kicked off in earnest this week with solid expectations for another quarter of double-digit earnings growth.  For the week, the S&P 500 closed higher by 2% at 2656.

The FOMC meeting minutes released on Wednesday were met with minimal reaction by markets.  Our most notable takeaway was the fact that each of the meeting participants agreed that the outlook for the economy beyond the current quarter had strengthened in recent months, although the members’ outlook on the path of rates does not share the same unanimity.  The “dot plot” of members’ projections of future rate paths remains widely dispersed, with the overall consensus for two to three more hikes to the short-term Fed Funds Rate this year.  Given the data we’ve seen, two incremental hikes seems the most plausible scenario.  The probability of an incremental hike in May priced in from the futures market stands at 30%.

The yield on the benchmark 10-Year U.S. Treasury ebbed and flowed modestly with risk sentiment before closing the week higher by 4 basis points at 2.82.  The spread between the 2-Year and 10-YearTreasury narrowed to 0.47% on solidified expectations of further hikes on the short end of the yield curve.  Oil prices rose to a nearly three year high on the news of potential retaliatory military action in the Middle East. 

Notable economic releases next week include Retail Sales, Industrial Production and Housing Starts.  Stay tuned as markets should be anything but boring as we move into the height of earnings season combined with whatever the next impulsive tweet or geopolitical headline turns out to be. 


Weekly Market Commentary

April 2nd – April 6th

Non-farm payrolls for March grew by 103k jobs, falling short of the 185k estimate.  Construction and retail workers felt the lion’s share of the pullback after spikes in those industries last month suggesting some degree of weather impact given the unseasonably warm February and the string of Nor’easters in March.  Payrolls from the prior two months were revised downward by 50k jobs as well.  The headline unemployment rate remains at 4.1% for a sixth straight month, still the lowest since 2000.  Average hourly earnings increased 2.7% as expected.  This level of wage growth feels like a “goldilocks” number to us, not too hot to stoke fears of inflation while sufficient enough to support consumption, the key to sustained economic growth. 

The ISM Manufacturing Index came in modestly below forecast, but still well into expansionary territory at 59.3 (readings above 50 signify expansion.)  Another month of solid spending on single-family home construction was reported.  The nation’s trade deficit deepened to $57.6B in February, indicating a likely pullback to Q1 GDP from net exports.

U.S. equities started and ended the week with selloff sessions related to trade tariff headlines, bookending three positive days for stocks.  The exchange of tariff jabs between the U.S. and China drove market sentiment in a risk on again / off again manner depending upon the interpretation of the public blows by both sides.  In the end, the S&P 500 closed down 1.38% for the week at 2,604.  The more technology-focused NASDAQ index closed down 2.10%, crossing below the 7,000 level at 6,915.

Fed Chairman Jerome Powell delivered his first economic-outlook speech in Chicago on Friday.  He stressed a balanced view of economic risks, citing a subdued view of wage growth, noting inflation has the potential to pick up this spring.  After a robust search including 100 candidates and 13 interviewees, John Williams was unanimously elected as the next NY Fed President as anticipated.  Williams brings a significant level of monetary policy experience and a reputation as a policy centrist from his years at the San Francisco Fed.

Interest rates rose modestly during the week with the 10-Year U.S. Treasury closing 3 basis points higher at 2.77% after trading within a range of 2.72%-2.83%.

Notable economic releases next week include CPI and PPI inflation, Import and Export Prices along with the release of FOMC minutes

Weekly Market Commentary

March 26th – March 29th

The third and final estimated Q4 GDP took the measure on a full circle trip, with a strong initial reading revised downward then subsequently back up.  The measure of total goods and services produced in the United States was reported back at a robust level of 2.9%.  With all the component revisions said and done, consumption accounted for 2.8% of the figure, indicating a strong fundamental basis as opposed to some of the more transient components that swung around between estimates. 

Personal Income rose 0.4% in February, in lock step with the prior month.  Consumption rose 0.2% as expected.   Personal savings increased from 3.2% to 3.4% meaning it has almost fully recovered to the pre-hurricane level of 3.5% in August.  On the inflation front, Personal Consumption Expenditures (PCE) rose by 1.8% on a year-on-year basis boosted by energy costs at the headline level, a tenth more than estimated, and 1.6% for the core, as expected.

The Chicago Fed National Activity Index came in stronger than expected.  U.S. manufacturing remains robust.  The Dallas and Richmond Fed Manufacturing Indices pulled back from lofty levels, although the capital expenditures component in the Richmond survey reached a 20-year high. 

U.S. equities rallied out of the gates as concerns of looming U.S. trade sanctions with China eased.  On Tuesday, trade friction concerns resurfaced causing equities to pare back gains as Tech, media and telecom stocks trended lower.  Equities rallied to end the shortened trading week with the S&P 500 finishing at 2640, up from 2588 while the Nasdaq and DOW finished the week slightly higher as well. 

Heightened inflation expectations have been short lived as the yield curve has resumed flattening.  On the week, the 10- year treasury rallied, finishing the week at 2.74%, 0.075% lower than prior week’s close.  The 2-10 spread compressed below .50% for the first time since January, now at .46%.   

Notable economic releases next week include the preliminary employment report and manufacturing figures. 

March 19th – March 23rd

As expected, the Federal Open Market Committee raised short-term rates by 0.25%.  Newly appointed Federal Reserve Chair Jerome Powell communicated a very similar message on monetary policy and expectations as his predecessor in his first official meeting as Chair.  The FOMC downgraded their current view on growth from “solid” to “moderate” given the revision of Q1 GDP estimates closer to 2% than 3%.  Forward guidance on growth remains positive and two incremental rate increases for 2018 remains the consensus.

February Durable Goods orders recovered strongly posting a 3.1% increase and modest upward revision for January to -3.5%.  President Trump signed a budget extension preventing another government shutdown. 

U.S. equities experienced a sharp selloff, with technology and bank stocks falling by the greatest amount.  Investor concerns over trade tariffs and rising interest rates heightened throughout the week driving indices markedly lower in the final two trading sessions.  For the week, the S&P 500 declined -5.9%.  The Dow lost over 1,400 points, declining -5.7%.

The U.S. 10 year Treasury yield ended the week at 2.81%, 5 basis points below where it started.  The bellwether Treasury traded in a range of 2.92-2.79% during the week, declining off the peak reached on Wednesday prior to the FOMC announcement.

Key economic data released next week includes a final Q4 GDP estimate, numerous regional manufacturing reports along with Personal Income and Outlays.


Weekly Market Commentary

March 12th – March 16th

Inflation reports this week were tame as expected.  The Consumer Price Index increased 2.2% on a year-on-year basis through February in line with estimates.  Core CPI was 1.8%.  Year-on-year Producer Prices increased modestly to 2.8%, still below the 3.1% level at the end of calendar year 2017.  Marginally higher import prices along with trade tariff concerns have raised eyebrows to the concept of “importing” inflation.

The February Retail Sales report disappointed, coming in at -0.1% versus an estimated 0.3%.  January sales were modestly revised upward from -0.3%, but remain negative at -0.1%.  This marks the third month of disappointing consumer spending data.  Excluding autos and gasoline, the results were modestly stronger at 0.2% in February following 0.1% in January.  While consumer confidence remains robust, spending has yet to catch up to sentiment causing some economists to decrease GDP forecasts. 

Regional manufacturing indices Empire State and Philly Fed both reported continued strength followed by a stronger than expected Industrial Production report of 1.1%.  Housing Starts and Permits continued to weaken in February. 

U.S. equities declined during the weak in a primarily risk off environment favoring bonds.  For the week, the S&P 500 declined -1.24% and Dow -1.54%.

The U.S. 10 year Treasury yield decreased 0.05% during the week to close at 2.84%.  Trading was fairly range bound within a 0.10% band in the week before the FOMC meets to discuss monetary policy.

All eyes will be on the Fed next week as the much anticipated March meeting of the FOMC takes place.  A 0.25% further hike in the Federal Funds Rate is expected.  Key economic data released next week includes Existing and New Home Sales along with Durable Goods.


Weekly Market Commentary

March 5th – March 9th

The highly anticipated employment data came in at just the right “temperature” with strong job growth and a modest pull back in wage growth appeasing concerns of an inflation spike.  Non-farm payrolls increased 313k, ahead of the forecast of 205k.  The headline unemployment level remained at 4.1%.  Wage growth as measured by year-on-year average hourly earnings increased at an annual rate of 2.6%, modestly below the prior 2.8% (revised) reading.  The pullback may be more related to a tick up in Labor Force Participation last month from 62.7% to 63.0% (perhaps tax cut related), and workers working more hours last month, than a change in actual levels of wages.

The ISM Non-Manufacturing Index exceeded expectations with a print well into expansionary territory.  New orders continued to strengthen along with order backlogs.  The Service Sector PMI strengthened as well noting a strong upturn in new business and an acceleration of price inflation.  Construction contractors noted ongoing difficulty finding skilled labor.  Factory Orders were less positive, falling 1.4% in January following weak Durable Goods orders released last week. 

U.S. equities increased modestly through the beginning of the week, overcoming concerns about the impact of trade tariffs and departure of top economic advisor Gary Cohn from the Whitehouse.  Stocks rallied following the strong employment and wage data release to cap the week with a strong final session.  The S&P 500 advanced on the week by 3.5%.

The U.S. 10 year Treasury yield closed modestly higher on the week at 2.89% after trading in a range of 2.90-2.82%.  Decreased concern of inflation pressures from the wage data reported Friday had little impact on the bond market indicating investors likely feel the expected upcoming Fed tightening is adequately reflected in the Treasury market.

Key economic data released next week includes CPI and PPI inflation data, Retail Sales and Housing Starts. 

Weekly Market Commentary

February 26th – March 2nd

The revised estimate for Q4 GDP, already lower than expected in the first report, was reduced to 2.5% from 2.6%.  The latest revision was driven by a larger inventory drawdown by companies than was previously estimated.  Despite the downward revision, we are somewhat comforted by the fact that changes came from the more transitory components of economic growth such as balance of trade and inventories while the largest component, consumer spending, remains unchanged at 3.8%. 

New home sales followed weakness in existing home sales, declining 7.8% in January to a seasonally adjusted annual rate of 593,000, but down only a modest 1% from year-ago levels. Additionally, pending home sales declined by 4.7% to the slowest pace in over three years.  Near record low inventory levels are constraining housing activity, as demand continues to exceed available supply.

Durable goods orders declined by 3.7% in January, below the estimate of -2.0%, while the prior month was revised down to 2.6%, from 2.8%.  The larger than expected decline was mostly attributable to the often-volatile commercial aircraft segment, but the pace of capital expenditures in the second half of 2017 appears to be slowing into 2018.

The Institute for Supply Management manufacturing survey increased at its fastest level since May 2004 to 60.8, up from 59.1 in January with 9 of the 10 series indexes expanding, while 15 of the 18 industries reported growth in the month.  Overall, business sentiment remains strong and growth appears likely through the first and into the second quarter.

Inflation measured by the Personal Consumption Expenditure Core Index was unchanged at 1.5% and the PCE Deflator was also unchanged at 1.7% year-over-year.  Despite inflation levels below the Federal Reserve’s long-term target of 2%, Fed Governors appear convinced that inflation will continue to increase and another rate increase in March is almost a certainty.

U.S. equities started the week with a positive return for the S&P 500 on Monday, but weaker economic data, testimony from Fed Chairman Powell, and a steel tariff announcement from President Trump on Thursday led to equity declines and increased volatility throughout the middle of the week.  Despite starting Friday off with a swift decline, market rallied to finish the day in positive territory.  Overall, the return for the week was -2.3%.

The U.S. 10-year Treasury yield began the week at 2.86%, bottomed at 2.80% on Thursday before ending the week almost unchanged at 2.85%.  After a steady rise throughout February, yields appear to be finding some footing until further economic data is processed, in particular, inflationary pressure.  The spread between the 2-year and 10-year U.S. Treasury was unchanged at 0.62%.

Key economic data released next week includes employment, ISM non-manufacturing, factory orders, consumer credit, and the release of the Federal Reserve Beige Book.

Weekly Market Commentary

February 19th – February 23rd

The FOMC minutes from January struck a positive tone on economic growth and renewed confidence on inflation reaching the Fed’s target of 2%.  A number of Fed Governors took their opportunity to pontificate on their own (unofficial) views of Committee policy during the week.  Existing home sales declined unexpectedly, off -3.2% for January.  While inventory of homes for sale remains below long-term averages, it ticked up modestly from 3.2 to 3.4 months, a 4% increase from December, but still 9% below supply from January of the prior year.

U.S. equities began the holiday shortened trading week with a pullback through the first two sessions with negative sentiment from a disappointing earnings report from Walmart.  After a wild rollercoaster swing (Dow up 300, down 450) following the release of the Fed minutes, stocks finished the final trading session with a strong broad-based rally.   The S&P 500 closed the week with a net gain up 0.55%.

U.S. Treasury yields continued to rise during a week of heavy new supply with $250bn of new Treasury offerings.  The release of upbeat minutes from the January FOMC meeting pointed toward steady economic growth consistent with further rate tightening. 10-year U.S. Treasury yields peaked at 2.95% during the week before settling at 2.87%.  The spread between the 2-year and 10-year U.S. Treasury has widened to 0.62%.

Key economic data released next week includes a revised estimate for Q4 GDP, New Home Sales, Durable Goods Orders, and national PMI, ISM manufacturing data.


Weekly Market Commentary

February 12th – February 16th

Consumer prices ticked up faster than anticipated in January with the Headline CPI reading coming in at 2.1% on a year-on-year basis relative to the consensus estimate of 1.9%.  Core CPI (excluding food and energy) was 1.8% versus an estimated 1.7%.  The key components of the increase were higher gasoline and apparel prices as well as a jump in the cost of hospital services.  The weaker dollar was a contributing factor to the large monthly increase in apparel costs given the high degree of imports.  Shelter costs remain inflated, but are no longer rising in the latest data. 

Retail Sales softened in January with a decline of -0.3%.  More disappointing was the meaningful revision to the initially strong holiday spending figures of the prior two months.  December was revised to flat from 0.4% and November decreased by 0.1% to a still robust 0.8%.  Weakness in auto sales weighed on the data, likely a result of a falloff in demand after accelerated vehicle replacements following the hurricanes.  A pullback in building materials may have been weather related, but weakness in non-store retailers (ecommerce) reported as flat in January and revised down from 1.2% to 0.5% in December is the most negative component of the release given its impact on the personal consumption component of GDP.

Industrial Production pulled back 0.1% in January.  A downward revision to December data was nearly fully offset by an upward revision applied to November.

U.S. equities had strong gains for the week after a short-term pause on Wednesday following the higher than anticipated inflation news.  Markets quickly stabilized and found support into a broad-based rally thereafter with the S&P 500 regaining ground back above 2,700 and the Dow back above 25,000.  Both indices advanced 4.3% for the week.

Treasury yields rose on the anticipation that the Fed may be more prone to raise rates as inflation measures rise.  The yield on the 10-Year U.S. Treasury jumped 10 basis points to 2.92% following the CPI release on Wednesday.  The bellwether Treasury traded in a wide range of 2.81-2.93% during the week before settling at 2.87% in the final session.

Next week is a holiday shortened trading week with the U.S. stock and bond market closed on Monday in observance of President’s Day.  It is a week light on key economic reports with existing home sales and release of FOMC minutes the most noteworthy.


Weekly Market Commentary

February 5th – February 9th

Jobless claims in the U.S. declined to a nearly 45 year low adding further support to the favorable employment outlook.  ISM and PMI non-manufacturing figures were strong as well showing positive growth in new orders and employment components.  Report of a widening trade gap between imports and exports may be a headwind to GDP again in the current quarter.

Heightened volatility in the stock market carried over into this week with a sharp sell-off in the first trading session followed by large swings in both directions throughout the week.  The S&P 500 reached correction territory on Thursday, defined as a peak to trough decline of greater than 10%.  Broad swings in the final trading session ended on a positive note recouping some of the earlier losses.  Strong corporate earnings continued to roll in throughout the week.  Market volatility has decoupled from fundamentals for the time being with major U.S. stock indices closing the week off just over 5%. 

U.S. Treasury yields gyrated throughout the week with the momentum of risk off capital flight-to-quality to bouts of risk on trading.  The 10-Year U.S. Treasury traded in a range of 2.88% to 2.66% before closing the week where it started back at 2.85%.  The UST yield curve steepened during the week with a final 2-10 spread of 0.79%.  Oil plummeted to the lowest point in six weeks, back below $60 per barrel, with rising inventories and rig counts.

A two year budget agreement was passed in Washington following another short-term government shut down which puts debt ceiling debates on hold for another year.

Notable economic releases next week include CPI, retail sales, industrial production and housing starts.  The details of the CPI report release on Valentine’s Day will likely define the fine line formed last week between speculator’s love and hate of risk assets. 

Special Update: Keeping Recent Stock Market Declines in Perspective

Feb 6, 2018

Large declines like the market experienced yesterday, with the Dow dropping 1,600 points and closing the trading day off 1,175 points, can be attention grabbing given that markets have risen for two years without a substantial pullback. The decline may have caught some investors off guard, with no help from sensational headlines in the financial press. Keep in mind that the large point drop was a less than 5% decline, an occurrence that has taken place numerous times throughout history and is no reason for alarm. As noted in our recent quarterly letter, economic fundamentals and corporate earnings are the strongest they’ve been thus far in the nine years since the recession, creating a positive backdrop for long-term investors.
To put the recent stock market pullback into perspective, the S&P 500 has historically experienced a “correction” (decline exceeding 10%) an average of once per year and entered a “bear market” (pullback of at least 20%) on average once every three years. In fact, while handsomely rewarding long-term investors with a return of 7.4% per year over the past 20 years, the S&P 500 has experienced a wide range of drawdowns in each calendar year as shown in the exhibit below. Notably, calendar year 2017 shows the smallest degree of pullback as complacent investors bid up stock prices in a period of extremely low volatility. That optimism carried over into 2018 with the S&P 500 advancing 7.5% in the first few weeks, before giving back those gains in the past week.
The key to any investment discipline is clearly defining goals and time horizon and matching an investment strategy with the highest probability of achieving success. Markets will trade on speculation, biases and emotion over the short-term, but we remain confident that over time they reflect the value of the underlying companies they represent. As with every other market pullback our experienced investment team has worked through, we intend to maintain our investment discipline and focus on capitalizing on opportunities that present themselves during turbulent periods.

Click here for the full article and a graphic representation of Intra-Year dips in the S&P 500 over a twenty year span.

Weekly Market Commentary

January 29th – February 2nd

Nonfarm payrolls rose 200k, ahead of the estimated 180k, adding to the positive employment outlook.  Headline unemployment remained unchanged at 4.1%, however stubborn wage growth expanded at 2.9%, the largest increase since 2009 and well ahead of expectations.  Both the ISM and PMI indices point to robust manufacturing results.  Output and new orders expanded at the highest level in a year and purchasing activity rose at the steepest pace since September 2014.  The Bloomberg U.S. Consumer Comfort Index rose with strong economic data and now stands at the highest level since 2001.  Personal Consumption Expenditures (PCE) declined modestly to 1.7% year-on-year from 1.8%.  The Core reading, ex-food and energy, was unchanged at 1.5%. 

The S&P 500 rediscovered volatility this week and logged the steepest weekly decline in two years, immediately following the strongest January return (+5.6%) since 1997.  Investors took profits sending the S&P 500 to a -3.8% decline for the week to 2,762.  Other major indices declined in lockstep with the Dow down -4.1% and the NASDAQ off -3.5% for the week.

U.S. Treasury yields rose throughout the week to levels not seen since 2014 driven by strong economic data and hawkish Fed comments.  As expected, in Janet Yellen’s last FOMC meeting, no rate announcements were made, however 3-4 Fed Funds hikes this year are now anticipated.  The 2-Year U.S. Treasury reached 2.14% and the 10-Year 2.83%.  Yields outside of the U.S increased as well.  10 year German Government Bond yields have doubled this year to over 75bps and JGBs (Japan) have risen from 0% in Q4 2017 to the upper policy band of 10bps.

Next week is light on economic releases.  ISM and PMI services data and JOLTS jobs report will be released.  The Fed Governors will make their usual speaking rounds to pontificate on their views of the FOMC discussions.   


Weekly Market Commentary

January 22nd – January 26th

The first estimate of Q4 GDP was reported at 2.6%.  While lower than the 3.0% expected year-on-year rate of growth, the shortfall was due to more transitory factors such as imports and inventories.  Personal consumption was a very healthy 3.8%, business fixed investment 6.8% and residential investment 11.6%.  These underlying figures tie into strong retail sales reported through the holiday spending season and support our thesis of positive economic momentum rolling into Q1 2018.   

Existing home sales declined 3.6% in December driven primarily by a lack of supply which hit a 3-year low.   Calendar year 2017 was the strongest for existing home sales since 2006 with 5.51 million properties changing hands. 

The U.S. government shutdown that went into effect last Friday at midnight ended on Monday.  A brief reprieve on budget debates is in place until February 8th.  The U.S. dollar continued to weaken exacerbated by headlines from Davos regarding Treasury Secretary Steve Mnuchin’s “preference” for a weaker U.S. dollar in a quote taken out of context that “a weaker dollar is good for trade”; citing the benefit afforded to exporters when the greenback weakens.  For those able to uncover his full statement beyond the sensational headlines, he also stated that the value of the dollar is determined by the market, is not a concern in the short-term and “in the longer term, a stronger dollar is a reflection of the strength of the U.S. economy.”  

U.S. equities continued their rise through a busy week of earnings announcements.  The S&P 500 advanced further into record territory closing at 2,872 as did the Dow closing at a new high water mark of 26,614.  The NASDAQ came back from a modest midweek pullback to a record 7,505.

U.S. Treasury yields continued to rise with the 2-Year closing up at 2.11%.  The yield curve remains historically flat with a 55 basis point spread between the 2-Year and 10-Year closing at 2.66%.

Notable economic releases next week include Factory Orders along with PMI and ISM manufacturing readings.  The FOMC holds a meeting next week in which no rate announcements are expected.  

Weekly Market Commentary

January 16th – January 19th

The Empire State Manufacturing Index declined to 17.7 from an estimated 19.0 level and the Philly Fed Manufacturing Index pulled back to 22.2 from an expected 25.  Some degree of the decline may be explained by unusually frigid weather in the Northeast and the “Bomb Cyclone” storm.  Industrial Production was revised down to -0.10% in November while expanding 0.9% in December. 

Single family Housing Starts experienced a seasonal decline in December while Building Permits were strong.  Initial jobless claims hit the lowest levels in a decade as the job market continues to tighten. 

U.S. equities advanced further in a holiday shortened trading week.  The Dow broke through yet another 1,000 point milestone in record time passing the 26,000 mark shortly after the opening bell in the first trading session of the week and closing beyond the new record in only 8 trading days!  The S&P 500 advanced further into record territory ending the week at 2,810. 

Yields rose across the U.S. Treasury yield curve this week as investors expect continued central bank tightening.  The 10-Year U.S. Treasury yield rose 0.11% to 2.66%, a level not broached since March of last year. 

Notable economic releases next week include an initial estimate of Q4 GDP and PCE inflation along with new and existing home sales. 

Weekly Market Commentary

January 8nd – January 12th

Retail sales rose for a fourth straight month capping the strongest November-December holiday spending period since 2010.  Overall sales rose 0.4% in December with 9 of 13 major categories showing increases.  The November figure was revised upward as well to 0.9% from 0.8%.  Excluding autos and gas, this was the largest fourth quarter increase in Retail Sales in 12 years.  A report released earlier in the week on consumer credit balances showed a spike in December with the highest monthly increase in 16 years.  In the latest reading, credit surpassed 25% of disposable household income for the first time. 

Core Inflation ticked up as well in December with the Core Consumer Price Index increasing 0.3% in December and 1.8% year-on-year.  Rising shelter costs were a driver as rents ticked up in conjunction with housing prices. 

U.S. equities continued their New Year climb during the week until Thursday, the first day of the year with a down trading session.  Markets then rallied again on Friday following the stronger than expected Retail Sales figures.  The S&P 500 advanced from 2,743 to 2,786 over the course of the week and the Dow Jones Industrial Average added more than 500 points to extend its meteoric rise. 

The U.S. 2-Year U.S. Treasury yield topped 2% for the first time since the financial crisis, more than doubling since the pre-election days of 2016.  The implied probability of a Fed rate hike in March surpassed 80% following the latest inflation data release.  The Ten 10-Year U.S. Treasury yield increased as well to end the trading week at 2.55%

U.S. stock and bond markets will be closed on Monday in observance of Martin Luther King Jr. Day.  Notable economic releases next week include Industrial Production, Housing Starts and regional manufacturing readings from Empire State and Philly Fed.


Weekly Market Commentary

January 2nd – January 5th

The December headline unemployment rate in the U.S. remains unchanged at 4.1%.  The change in Nonfarm Payrolls fell short of expectations at 148k new jobs.  Average hourly earnings grew during the month at 0.3%, while year-over-year growth remained modest at 2.5%.  A total of 2.06 million jobs were created in the U.S. in calendar year 2017.  That is less than 2016, but modestly more than was expected at the beginning of the year.  December manufacturing reports from ISM and PMI showed continued solid expansion.  New Orders were particularly strong.  November Factory Orders came in meaningfully higher than the previous month increasing 1.3%. 

After setting an unprecedented number of records in 2017, U.S. equity indices charged forward into the New Year quickly reaching new milestones.  The S&P 500 crossed the 2,700 mark closing at 2,742.  The NASDAQ closed above 7,000 ending the week at 7,136.  Not to be outdone, the Dow broke through another 1,000 point milestone in only five short week to end at 25,295.  The VIX “fear gauge” is back to near record lows. 

The Ten 10-Year U.S. Treasury yield rose in the first trading week of the New Year from 2.41% to close at 2.47%.  The Treasury yield curve continued to flatten with short-term rates rising more quickly.  The spread between the 2-Year and 10-Year U.S. Treasury fell below 50 basis points during the week for the first time in over a decade. 

Notable economic releases next week include inflation measures of CPI and PPI along with December retails sales. 


Weekly Market Commentary

December 18th – December 22nd

The final estimate of Q3 GDP was revised down to 3.2% from 3.3% as consumer spending was modestly weaker than initially reported.  The consumption number was revised to 2.2% from 2.3%.  In November, personal spending rebounded by 0.6% which beat expectations and the prior month’s number as consumers visited stores and the internet for their holiday shopping. 

U.S. new home sales raced to a 10-year high jumping 17.5%. Last month’s 733k new homes sales were the highest level since July of 2007 as the figure easily beat expectations of 685k. Single family housing starts and permits expanded to the highest level in a decade while inventory of homes for sales hit new lows. 

Personal Consumption Expenditures (PCE) rose 0.1% in November from a month earlier, in line with expectations but below the 0.2% gain registered in October. On a year-on-year basis headline PCE expanded to 1.8% and the core reading to 1.5%.  Personal income registered an increase of 0.3% in November, missing its forecast of 0.4%. 

The tax reform bill was approved by the House and Senate and signed into law by the President.  Among the numerous provisions is a reduction to the corporate tax rate from 35% to 21%.   Multiple companies reacted to the passing of the bill by increasing their minimum wage and handing out year-end bonuses.

The major U.S. equity indices ended the week slightly higher than they started as the news of a completed tax reform bill did not move markets nearly as much as the anticipation.  The S&P 500 ended the week at 2,683 and the DOW at 24,754 to close out five consecutive weeks of gains.  The NASDAQ index briefly crossed the 7,000 mark in intraday trading on Monday, but retreated to close the week at 6,960.

The ten 10-Year U.S. Treasury sold off this week as inflation expectations materialized.  The bellwether yield now stands at 2.49% up from 2.35%.  The yield curve experienced a rare week of modest steepening after an upward parallel shift. 

This will be the last weekly market commentary until 2018.  We wish our readers a happy and prosperous new year.  Please be sure to read our year-end market review in the Q4, 2017 client letter in the coming weeks. 


Weekly Market Commentary

December 11th – December 15th

November Retail Sales were stronger than expected as the holiday shopping season kicked off with the same fervor as the U.S. stock market this year.  The 0.8% print for the month was well ahead of the consensus estimate of 0.3%.  On a year-on-year basis, an increase of 5.8% was the strongest November reading since 2011.

The Producer Price Index (PPI) for November rose more than expected bringing the year-on-year headline reading of producer inflation to 3.1% from 2.9%.  Increases came from the volatile food and energy categories as the core measure was unchanged at 2.4%.  Energy rose 4.6% due to a 15.8% jump in gasoline, the biggest one month rise since 2009.  The Consumer Price Index (CPI) showed more modest change.  The headline rose to 2.2% from 2.0% driven by a 3.9% rise in energy prices paid by consumers.  The Core reading fell to 1.7% from 1.8% one month ago. 

The S&P 500 ebbed and flowed during the week as investors closely followed tax reform news out of Washington.  A surge in the final trading session led the index to a nearly 1% gain on the week closing at 2,675.  Despite the periodic retrenchment of the S&P, volatility has maintained record lows.  The index has spent an average of 99 days per year with a drawdown of 3% or greater since 2002.  A pullback of this magnitude has not occurred on a single day thus far in 2017.  2017 may also potentially be the first year with all 12 months posting positive returns. 

As expected, the Federal Open Market Committee raised the Fed Funds rate by 0.25%, a fifth increase in the current tightening cycle.  The 10-Year U.S. Treasury bond yield ended the week roughly where it started at 2.35% after trading in a range of 2.42–2.34%.  The yield curve flattened further with the spread between the 2-year and 30-year U.S. Treasury narrowing to only 0.86%. 

Key economic releases next week include the final estimate of Q3 GDP, Housing Starts, Existing and New Home Sales along with Durable Goods


Weekly Market Commentary

December 4th – December 8th

228k jobs were created in October, exceeding economists’ expectations of 200k.  The reported 4.1% unemployment rate was in line with consensus estimates and provided the market clarity as the first material jobs number since the natural disasters.  However, wage growth disappointed again posting an annualized gain of 2.5%, below the 2.7% that was expected.  The under-employment rate, a measure of underutilized workers, ticked up to 8.0% from the prior 7.9% reading while the labor force participation rate remains historically low at 62.7%.  The ADP private payrolls data came in line with expectations at 190k. Beneath the headline number, manufacturing payrolls increased 40k, the largest increase since ADP started the reports fifteen years ago.  Non-farm productivity increased 3.0% last quarter, below expectations of 3.3%. 

The ISM and PMI non-manufacturing indices continued to show expansion, reporting figures over the 50 expansionary benchmark.  ISM non-manufacturing posted a reading below the consensus estimate of 59 at 57.4.  Both the service and composite PMI numbers came in at 54.5, roughly in line with expectations.  Factory orders beat expectations only decreasing 0.10% compared to the 0.40% expected decline while durable goods orders were down 0.8%, beating expectations of a decrease of 1.1%.  

The 10-Year U.S. Treasury finished the week largely unchanged at 2.38% as no major policy announcements were made.  The yield curve continues to flatten as the Federal Reserve unwinds its balance sheet.  The spread between the 2-year and 10-Year treasury stands at 0.58%, the tightest in over a decade. 

Congress passed a two-week debt ceiling extension avoiding a government shutdown tomorrow and kicking the can down the road to December 22nd.  Optimism around tax reform shifted market dynamics early in the week as investors rotated into financials and tax burdened companies while taking profits in many of the large cap technology names. On Thursday, the S&P broke its four day losing streak, the longest since August, finishing up on the week at 2,651.  The DOW and NASDAQ finished the week largely unchanged at 24,329 and 6,840, respectively. 

Next week’s Important Economic announcements include CPI, PPI and Retail Sales. 


Weekly Market Commentary

November 27th – December 1st

The second estimate of Q3 GDP was revised upward to 3.3% from an initial estimate of 3.0%.  The personal consumption component remained healthy while the key contribution to the revisions came from inventory build.  Personal Consumption Expenditures (PCE) remained benign and well below the 2% level of inflation targeted by the Fed.  The year-on-year reading through October was in line with consensus at 1.6% as was the Core (ex-food and energy) at 1.4%.  The Fed’s Beige Book report points to more tightness in the labor markets and rising price pressures. 

Continuing the trend of strong housing data releases, new single family home sales came in well ahead of survey at 628k, the highest level in a decade.  Homebuilders are once again preselling a large number of new homes.  Despite a leveling off in median new home prices, the average price just hit a new high, signifying an increase in luxury home sales to confident consumers.  Consumer confidence continues to rise, with both current conditions and expectations rising in the latest report, boosting sentiment to a 17-year high.

The S&P 500 eked out another positive week, breaking new records and closing 1.5% higher than it started.  The positive momentum reversed course on Friday based on news out of Washington.  Former National Security Advisor Michael Flynn pled guilty and admitted to lying to the FBI about communications with Russia’s ambassador.  The market sold off -1.3% immediately on the news before recovering nearly fully by the end of the trading session.  “Buy the dips” ruled the day once again. 

The 10-Year U.S. Treasury bond yield trading within a range of 2.31% to 2.43% over the course of the week before settling 2 basis points higher than it started at 2.36%.  A flight-to-quality during the short-lived equity sell off sent yields down 7 bps in a matter of minutes on Friday.  President Trump nominated Marvin Goodfriend, an economics professor at Carnegie Mellon and former Fed economist, to fill one of the four vacant seats on the Fed Board. 

Key economic releases next week include ISM and PMI Non-Manufacturing Indices, Factory Orders, and Productivity and Costs. 


Weekly Market Commentary

November 20th – November 24th

Durable Goods Orders were soft in October at -1.2% following strong readings over the past two months.  Vehicle sales and capital goods shipments remained positive.  Existing Homes Sales were stronger than anticipated, up 2% in October at 5.48mm, giving housing a second wind following strong new building permits and starts last week.  The Chicago Fed National Activity Index was well ahead of expectations, at 0.65 versus 0.20 consensus.  Strength in this reading on the back of improved industrial production is supportive of healthy economic growth from the manufacturing sector.

U.S. equities closed the holiday-shortened trading week with a gain.  The S&P 500 finished the week back at modestly above the 2,600 mark, advancing 0.9%.  Technology shares shined once again, driving the NASDAQ to a 1.6% gain on the week and back into record high territory.  The FAANG stocks (Facebook, Amazon, Apple, Netflix, Google) are now collectively roughly 30% higher year-to-date than the overall market.

The VIX index is back below 10.  The highest intra-day print for the “fear gauge” measure this year is 17.3.  At this level, 2017 may finish the year as the second lowest for this index in the past 25 calendar years.  The DJIA reached a 70 consecutive trading day streak of less than a 1% intraday move, by far the longest going back into the data archives to 1930.  Investors were clearly cool and calm at the mention of financial markets while digesting Thanksgiving dinners this year.

The 10-Year U.S. Treasury bond yield closed the week at 2.34%.  The yield curve continued flattening with the 2-10 spread now deeper into a decade-long low below 0.60% from a 1.25% spread at the start of the year.  Similarly, the 2-30 spread fell below 1.00% to the lowest in a decade.  Fed Chair Janet Yellen announced that she will resign from the Federal Reserve Board of Governors when her successor Jerome Powell is sworn in as the newly elected Chair.

Key economic releases next week include revised Q3 GDP, New Home Sales, along with ISM and PMI Manufacturing Indices.


Weekly Market Commentary

November 13th – November 17th

Inflation measures ticked up modestly with the Producer Prices Index (PPI) beating expectations by rising 2.8% over the past year through the end of October.  The Consumer Price Index (CPI) headline figure for the same period was in line with expectations at 2.0%.  Core CPI, ex-food and energy, modestly exceeded the prior reading and expectations at 1.8% vs. 1.7%.

Retail Sales met expectations in October, slowing to a 0.2% monthly gain following a hurricane-related spike in September driven by replacements of automobiles.  Retail Sales ex-Autos and Gas was modestly higher at 0.3%.  Industrial Production rose well ahead of expectations at 0.9% vs. 0.5% with a post-hurricane surge in demand.  Manufacturing led the charge with a 1.3% rise as well as an upward revision for September from 0.1% to 0.4%. 

The Senate Finance Committee passed a tax reform bill after the House passed their own version a major tax overhaul.  The full Senate will vote on the matter after Thanksgiving.  If passed, the process of trying to close the expansive divide between the two bills will begin.

U.S. equity investors finally took their foot off the accelerator through midweek before downshifting back into risk-on mode on Thursday. The S&P 500 ended the week a few points higher than it started at 2,579.  Investor confidence is nearing record high levels driving volatility in the S&P 500 to fifty year lows.  We are now in the longest period in the recorded history of the S&P 500 of trading without a 3% or more pullback.  The Dow Jones Industrial Average has gone over 60 consecutive days without a 1% intraday move, the longest streak going back to the original great recession of the 1930s. 

The benchmark 10-Year U.S. Treasury bond yield closed the week at 2.34% after trading in a range of 2.41 – 2.32%.  The Treasury yield curve flattened further with the 2-10 Year Treasury spread dipping below 65 basis points, a low not seen in the past decade.  With the probability of a 25 basis point increase to the Fed Funds Rate in December fully priced into the market, the probability of an additional increase by the end of Q1 2018 has ticked up to above 50%.

Key economic releases next week include Durable Goods Orders, Existing Homes Sales and the Chicago Fed National Activity Index.  U.S. markets are closed on Thursday in observance of the Thanksgiving holiday and the NYSE closes early on Friday.



Weekly Market Commentary

November 6th – November 10th

Key economic releases slowed down considerably this week to primarily just the usual weekly reports after a particularly busy couple of weeks.  The 4-week average of initial unemployment claims hit another multi-decade low.  Crude oil prices ticked up closing the week at $57 per barrel.  Consumer sentiment soft data continues to meaningfully outpace the latest hard data of consumer spending measures. 

The break in economic releases gave investors the opportunity to reflect on the 400 earnings reports of the S&P 500 companies released through the end of last week.  Another 960 companies reported results this week as the fire hose of earnings announcements draws to a trickle.  As we enter the home stretch, corporate earnings for the S&P 500 have grown roughly 8% in the third quarter, led by companies within the energy, information technology and materials sectors.  Excluding the volatile energy sector, facing very low year-on-year comparisons, earnings have increased 5.6%.  Stock dispersion continues to rise as companies reporting disappointing earnings, or cautionary forward guidance, have declined while companies reporting positive surprises have been bid up. 

U.S. equities experienced higher than usual volatility on Thursday with a general sell off predicated on concerns about a division between the House and Senate on tax reform.  The “buy the dips” strategy kicked in allowing indices to bounce back off session lows before closing.  This is the first week that all three major U.S. indices, the S&P 500 (-0.2%), Dow Jones Industrial Average (-0.5%) and NASDAQ (-0.3%), declined since the first week of September.

The benchmark 10-Year U.S. Treasury bond yield closed the week where it started at 2.32% after vacillating within a tight band of a few basis points higher or lower throughout the week.  A 25 basis point hike to the Fed Funds Rate next month is essentially fully priced into the futures market.

Key economic releases next week include Retail Sales, CPI and PPI inflation measures, Industrial Production and Housing Starts.


Weekly Market Commentary

October 30th – November 3rd

The US economy created 261k jobs in October which was below the 310k figure economists anticipated.  However, prior month’s revisions of 90k painted a more positive picture as lingering effects from the natural disasters distorted economic data.  The reported 4.1% unemployment rate was a tick below the expected 4.2% number while US worker productivity rose at a 3% annualized rate in the 3rd quarter, higher than the 2.4% expected rate.  Wage growth disappointed after lofty expectations (2.7%) with a below trend 2.4% annualized gain.  

Personal Spending jumped 1% in September, modestly beating consensus estimates.  This marks the largest gain in personal consumption since August 2009 as auto sales and utilities recovered quickly from the effects of Hurricanes Irma and Harvey.  The Dallas Federal Reserve Bank reported its best reading since March of 2006 at 27.6 due to an increase of new orders for the month, a figure well above estimates. 

Details of the much anticipated tax reform were revealed on Thursday.  The major changes for individuals included simplifying the tax brackets, increasing the standard deduction, reducing the mortgage deduction, and eliminating the Alternative Minimum Tax.  In addition, Corporations will have their tax rate reduced to 20% in hopes of spurring higher growth.   

President Trump made his Fed Chair nomination, selecting Jerome “Jay” Powell who previously served on the Federal Reserve Board of Governors during Yellen’s tenure.  Fixed income yields retreated throughout the week.  The 10-Year U.S. Treasury traded 0.04% lower to 2.33% as the yield curve continues to flatten.  While the Fed left rates unchanged as expected, the probability of a December rate hike increased to 92.3% after Yellen’s comments on Wednesday.

Over 1,075 companies reported earnings this week completing three fourths of the earnings season.  Although many larger companies had positive earnings reports, lower forward guidance drove a number of benchmark positions lower.  The S&P 500 increased from 2575 to 2587 on the week while the DOW increased from 23,350 to 23,539.

Next week is a light week for key economic releases allowing investors to focus on the continued flow of corporate earnings announcements. 

Weekly Market Commentary

October 23rd – October 27th

The advance reading of Q3 GDP came in higher than expected, increasing 3.0% versus an estimated 2.6%.  Consumer spending, the key driver, grew 2.4% versus an estimated 2.1%.  3.0% growth in Q3 following 3.1% in Q2 is the best consecutive two quarter reading since 2014.  The economy appears to have snapped back more quickly than anticipated following back-to-back hurricanes.

The Markit Manufacturing and Services PMI reports came in stronger than expected, following suit from strong regional readings last week.  Manufacturing was well into expansionary territory at 54.5, as were services at 55.9.  The Kansas City Fed report followed suit with the highest reading since 2011 at 23.0 versus a survey of 17.0  The Richmond Fed Manufacturing Index however, came in below expectations at 12.0 versus the survey of 16.5.

Durable goods orders for September beat expectations rising 2.2% versus an estimated 1.0%.  U.S. new home sales were strong as well, unexpectedly jumping to the highest in a decade.  Activity accelerated in the South following the hurricanes, driving the reading

The S&P 500 surged to yet another record of 2,581 on the back of strong earnings announcements, particularly from large technology companies.  The technology-heavy NASDAQ 100 got the biggest boost in 20 months.  850 companies released Q3 earnings this week, with far more exceeding expectations than trailing.

European equities also rallied as Mario Draghi announced a modification to the bond buying program that was more dovish than expected.  While the ECB will buy fewer bonds per month, they will extend purchases further into the future setting a “lower for longer” tone on rates.

The yield on the 10 U.S. Treasury rose throughout the week in conjunction with the resurging reflation trade in the equities markets.  The bellwether yield rose as high at 2.47% on Friday from a low of 2.04% reached last month, before settling back down to close the final trading session at 2.41%.

Important Economic Releases next week include the ADP Employment Report, Dallas Fed Manufacturing Survey and Factory Orders.  The FOMC will also hold a two day meeting with no policy announcements expected. 


Weekly Market Commentary

October 16th – October 20th

The Empire State Manufacturing Survey exceeded expectations with a strong report of 30.2 versus an estimated 20.4.  This is the strongest reading for the NY area since the post-recession recovery of 2009.  The Philly Fed Business Outlook Survey also exceeded consensus expectations with a strong reading of 27.9 versus 22.0 estimated.  The strong regional readings should bolster expectations for the national (ISM and PMI) manufacturing surveys struggling to overcome hurricane impacts.  Industrial production limped back into positive territory with a 0.3% September monthly reading, exceeding the modest 0.2% expectation.  Mining and utilities components exceeded manufacturing results.  The storm impacted August reading of -0.9% was revised upward to -0.7%.

The release of the latest Beige Book reports that labor shortages may be hindering economic growth and shortages of housing inventory are restraining the sector.  Housing starts at 1.13 million and permits at 1.22 million for September trailed the prior month and consensus estimates.  Existing home sales grew by 0.7% during the month.  The 5.39 million annualized reading was the first gain reported in four months and modestly beat consensus.  The National Association of Realtors reported that sales in Florida are down considerably while Houston area sales have already recovered. 

U.S. equities advanced for the week.  The Dow Jones Industrial Average continued setting new highs, closing the week at yet another new milestone of 23,328 in a sixth straight week of gains for the index.  The S&P 500 closed the week a fraction of a percentage point higher at 2,575.  Corporate earnings releases for Q3 are coming in mixed creating increased dispersion of returns for benchmark constituents. 

The yield curve remains flat given expectations for a December rate hike.  The 2-10 U.S. Treasury spread stands at 0.81%.  The yield on the 10 U.S. Treasury advanced 9 basis points during the week to close the final trading session at 2.38%.

As President Trump meets with candidates to nominate as the next Fed Chair, speculation swayed throughout the week amongst five candidates: current Fed Governor Jerome Powell, former Fed Governor Kevin Warsh, Stanford University economist John Taylor, National Economic Council Director Gary Cohn and current Chair, Janet Yellen.  The President has indicated that he will make the nomination prior to an upcoming international trip on November 3rd

Important Economic Releases next week include the advance estimate of Q3 GDP, Chicago Fed National Activity Index, Durable Goods Orders and New Home Sales.


Weekly Market Commentary

October 9th – October 13th

The headline CPI measure of inflation increased from 1.9% to 2.2% on a year-on-year basis driven primarily by the temporary spike in energy prices which rose 6.1%, led by a spike in gasoline up 13.1%.  Core CPI excluding food and energy was unchanged at 1.7%.  Retail sales rose 1.6% in September also impacted by energy prices and a rise in auto purchases replacing those lost in the storms.  Ex-Autos and Gasoline the monthly report was a much more modest 0.5%. 

The back-to-back hurricanes of a month ago have meaningfully impacted recent data reports skewing employment figures, wages (utility worker overtime), spending (auto replacements, building materials), industrial production and housing.

Major U.S. indices broke into record territory once again with the S&P 500 closing the week at 2,553 and the Dow at 22,871.  The reflation trade bolstered by renewed talk of tax reform has investors positioned clearly in the “risk on” camp.  The VIX “fear gauge” remains at historic lows. 

Rates declined during the week as investors found less value in the safety of U.S. Treasuries.  The 10-Year U.S. Treasury finished the week lower by 9 basis points at 2.28% and the 2-Year at 1.50%.  The yield curve remains flat as evidenced by the 0.78% 2-10 spread and 1.30% 2-30 spread.

Despite internal debate on inflation reported in the latest FOMC minutes, the probability of a rate hike in December priced in from the futures market remains near 73%.  Members looking for incremental signs of inflation to base a decision on had little to find in the core components of the CPI report.  The U.S. dollar strengthened in conjunction with rate expectations. 

Important Economic Releases next week include regional manufacturing indices, Industrial Production, Housing Starts and Existing Home Sales. 


Weekly Market Commentary

October 2nd – October 6th

The unemployment rate fell to a 16-year low of 4.2% in September.  The Nonfarm Payrolls report showed a loss of 33,000 jobs, negatively impacted by the aftermath of Hurricanes Harvey and Irma.  Wage growth came in above expectations at 2.9% year-over-year. 

The ISM and PMI manufacturing indices continued to show expansion as ISM manufacturing posted its best reading since May of 2004 at 60.8.  Supply disruptions surged during the storms.  The Manufacturing PMI number came in at 53.1, roughly in line with expectations.

The U.S. trade deficit dropped 2.7% to $42.4 billion in August, an 11-month low, due to dissipating headwinds of the U.S. dollar as well as higher exports of drugs, semiconductors and equipment for phone networks.  The finalized Durable Goods figures for August were released, topping prior estimates at 2.0%, largely due to an upward revision of Capital Goods.  Factory Goods were also revised upward to 1.2%.

The S&P 500 (2,547) posted its first eight day period of consecutive gains since 2013 with the index setting six straight record highs, the longest streak since 1997.  The VIX “fear index” set another record closing at an all-time low on Thursday at 9.19.

Rates continued to rise as the implied probability of a rate hike in December reached 80%.  Speculation about Janet Yellen’s successor was in the forefront of news this week as the market awaits the appointment of the new Fed Chair.  The 10 Year U.S. Treasury finished Friday at 2.37%, up 3.4 basis points from a week ago while the 2 year finished higher at 1.52%.

Important Economic Releases next week include CPI and PPI inflation reports and retail sales. 


Weekly Market Commentary

September 25th – September 29th

The third estimate of second quarter GDP was revised upward to 3.1%, boosted by revisions from inventories (particularly from farms) and construction.  While this is the strongest economic growth print in the last two years, the hurricane-impacted Q3 figure and rebuilding boost into Q4 will determine if the post-recession 2% growth trajectory will be nudged higher.  Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge, remained muted with the August release coming in at 1.4% year-on-year, down from 1.5% reported the previous month.

Durable Goods orders were strong at 1.7% in August, led by capital goods which increased 0.9% versus an estimate of 0.3%.  The Chicago Fed National Activity Index trailed already subdued expectations coming in at -0.31 versus -0.25.  Regional manufacturing indices however, showed solid strength as the Dallas, Richmond and Kansas City Fed Manufacturing Indices exceeded consensus estimates. 

New Home Sales were weaker than expected in August at 560k.  This is the lowest level of the calendar year and factors in a partial month impact from Hurricane Harvey on the Houston area.  High end homes saw the greatest pull back.  The latest reading of Pending Homes Sales also declined by -3.10%.

The S&P 500 broke into record territory yet again, closing the final trading session at 2,519.  Talk of proposed tax reform boosted investor confidence, particularly within the banking sector.  The VIX “fear index” is back below a historically low 10 again.  There have been no moves of greater than 2% in the S&P 500 Index thus far in calendar year 2017, the first year of such muted daily volatility since 2005.  The index has recorded its lowest maximum drawdown in 2017 than any other calendar year on record.

Rates rose on the back of a hawkish Fed and renewed discussions of tax reform.  The 2 Year U.S. Treasury reached the highest level since 2008 at 1.49%.  The 10 Year U.S. Treasury Yield climbed from 2.23%, closing the week at 2.33%.  In what appears to be a case of the old “don’t’ fight the Fed” adage, the implied probability of a rate hike within the calendar year has risen to 70%.

Important economic releases next week include ISM and PMI Manufacturing Indices, Factory Orders and Employment reports.


Weekly Market Commentary

September 18th – September 22nd

The number of New Building Permits exceeded expectations at 1.3mm versus an anticipated 1.22mm, led by a pickup in multifamily homes.  Housing starts met consensus at 1.18mm and Existing Home Sales declined -1.7% in August with some initial effects of Hurricane Harvey in the mix.  The Philly Fed manufacturing Index came in ahead of expectations at 23.8 versus 17.1.  A weaker dollar has served as a tailwind to U.S. manufacturing exporters. 

The S&P 500 finished the week where it started at 2,502 after giving back modest gains earned earlier in the week.  The VIX Index “fear gauge” dipped back below 10 again signaling investors’ complacency with risk despite heightened rhetoric and threats being exchanged between the U.S. and North Korea during the course of the week.

The Fed left interest rates unchanged as expected.  Following the midweek FOMC meeting, they announced plans for a much anticipated unwinding of the $4.5T balance sheet to begin next month.  The scheduled amount allowed to roll off each month (by not being reinvested) will be $10B initially ($6B UST, $4B MBS) and increase by $10B each quarter until a cap of $50B per month is reached.  The 10 Year U.S. Treasury yield rose modestly from 2.21% to 2.25%.

Important economic releases next week include additional manufacturing activity from the Chicago and Dallas Fed as well as Durable Goods and New Home Sales reports.  Prepare for the parade of Fed Governors all hitting the speaking circuit and usual media blitz throughout the week.


Weekly Market Commentary

September 11th – September 15th

The Retail Sales report for August was weaker than anticipated coming in at -0.2% versus the consensus estimate of 0.1%.  The 0.6% figure from July was revised lower to 0.3% and June from 0.3% to -0.1%.  The softer than expected data combined with an anticipated further fall off from the impact of the hurricanes does not bode well for an already sluggish GDP trajectory.  As anticipated, Industrial Production took a hurricane-related hit declining -0.9% relative to a 0.1% estimate.  Weakness in utilities was by far the most meaningful drag declining -5.5% on forced outages following Hurricane Harvey. 

The CPI figures for August rose 0.4% at the headline and 0.2% for core.  Headline inflation rose to 1.9% on a year-on-year basis from 1.7% and Core CPI was unchanged at 1.7%.  Headline increases were driven by higher energy prices in the month which expanded 2.8%.  Gasoline rose 6.3% and fuel oil 2.9%.  The survey data does not yet include an impact from the hurricanes, with the exception of a potential demand run up in anticipation of the storms, as it was conducted before Hurricane Harvey made landfall.  A much more meaningful spike in gasoline prices based on supply disruption from the storms is anticipated in the September report. 

The U.S. Job Openings report came in above expectations at an all-time high of 6.17mm.  The hires-to-openings ratio declined further indicating that a mismatch in candidate skills and employment opportunities is widening. 

The refinery capacity in the Gulf Coast quickly came back online this week.  Gasoline futures prices have reversed a good portion of the hurricane-related rally although retail gasoline prices at the pump have remained stubbornly at multi-year highs.  Oil topped $50 per barrel for the first time in a month giving a boost to the downtrodden energy sector and the U.S. dollar weakened against other major currencies

The S&P 500 broke into new record territory again as hurricane and geopolitical-related concerns abated by midweek.  The S&P closed the week at 2,500.  The current bull market which began in 2009 now ranks as the third strongest in history, edging past the 266% gain recorded in the bull run from 1949-1956. 

With risk back on in the markets this week, U.S. Treasury yields rose meaningfully from 2.09% to 2.20%.  The CPI report is the last key inflation-related data point release before the Fed meets to consider rates next week.  A further increase in the Fed Rates is not anticipated until December at the earliest. 

Through the lows last week, conforming mortgage rates dropped an average of 0.48% since mid-March leading to a significant rise in refinancing activity.  Unlike the wave of refinancings a decade ago, this round does not have the personal consumption catalyst of “cash-out” deals prevalent at that time. 

Important economic releases next week include Housing Starts, Existing Home Sales and the Philly Fed Business Outlook Survey.  Traders, investors and speculators will all be focused on the Fed next week when they release their post meeting comments on Wednesday. 


Weekly Market Commentary

September 4th – September 8th

Factory orders dropped significantly in July due to a decline in aircraft demand.  Orders Ex-Transportation increased 0.5% relative to the headline figure of -3.3%.  ISM and PMI Services indices showed continued expansion with strength in business activity and employment.

The Fed Beige Book Report showed continued labor market tightness, with a distinct lack of wage growth.  A rise in inflation without underlying wage growth appears unlikely, furthering our view that the Fed remains on hold with an additional short end rate hike.  A rise in headline CPI is expected based on a rise in fuel costs, but those impacts are expected to be transitory. 

President Trump supported a stop-gap agreement, approved by the House, that pushed government shut down risk from October to December and ties in aid for the devastation caused by Hurricanes Harvey and Irma.  Jobless claims surged at the highest level since Hurricane Sandy as tens of thousands of workers displaced by the storm filed for benefits.  Initial jobless claims increased by 62k to a seasonally adjusted 298k.  Continuing claims however, fell by 5k to 1.94mm.

Equity markets paused from their steady upward march and gave ground early in the holiday shortened trading week.  The S&P 500 closed the week down less than half of a percent at 2,461.

U.S. Treasury yields declined on a flight-to-quality amid geopolitical concerns.  Long rates now stand at the lowest level since the November election.  The yield on the 10 year U.S. Treasury fell to 2.02% during the final trading session before closing at 2.05%.  With a further flattening of the yield curve, the 2yr-10yr Treasury spread declined to a post-election low of 0.79%.  The probability of an additional Fed rate hike this calendar year declined further to 25%.  We need to look out to Sep. 2018 now for a greater than 50% probability of a rate hike priced in from the futures markets.  Federal Reserve Vice Chairman Stanley Fischer announced his resignation effective in October.  This is two years prior to the end of his term as governor and nine months prior to the end of his term as Vice Chairman. 

Important economic releases next week include Retail Sales and CPI, PPI inflation measures.  Additional signs of weather-related impacts on jobless claims will be closely monitored as well. 


Weekly Market Commentary

August 28th – September 1st

Consumer confidence levels jumped to the second highest since 2000 as reported by the Conference Board, despite concerns about a further U.S. political divide and North Korean aggression.  The revised estimate of Q2 GDP came in higher at 3.0% following stronger than expected Retail Sales figures earlier in the month.  Personal consumption, the key driver of GDP, was increased from 2.8% to 3.3%.  Inflation remained benign with year-on-year headline PCE for August unchanged at 1.4%.  Hiring slowed in August with nonfarm payrolls increasing a lower than anticipated 156k as well as a collective 41k reduction to June and July data.  Average hourly earnings growth disappointed at 0.1%, now the fifth consecutive month of year-on-year hourly earnings growth of 2.5%.  The headline unemployment rate ticked back to 4.4%.  Despite the disappointing employment and wage growth data, the economy remains at “full employment” per the Fed.  Weak inflation is likely to give the FOMC pause over an additional rate increase anytime soon. 

Volatility returned to the equity market early in the week following another missile launch from North Korea, but settled back down as quickly as it arrived.  Equity markets capped a positive week with the NASDAQ once again breaking into record territory at 6,435.  The S&P 500 closed the week up over 1% at 2,476.

The yield on the 10 year U.S. Treasury declined early in the week on a short-term flight to quality, hitting an intra-trading session low of 2.09% briefly on Tuesday before rising to 2.16% to close the week.  The probability implied by the futures market of an additional Fed Funds rate increase during calendar year 2017 has dropped to 34%.

Important economic releases in the holiday shortened trading week next week include: Factory Orders, PMI and ISM Services Indices and Productivity and Costs.



Weekly Market Commentary

August 21st – August 25th

The Chicago Fed National Activity Index, coming in at -0.01 while missing the consensus estimate of 0.22, kicked off the economic week on a low note. Although the report was disappointing, the CFNAI was weighed down primarily by manufacturing production and housing permits, undercutting what was otherwise a solid month for the Index. The Richmond Fed Manufacturing Index expanded for the tenth consecutive month in August, coming in at a level of 14, higher than the consensus range of 9 to 12.  On a similarly positive note, the Kansas City Fed’s Manufacturing Index came in at 16, beating its prior reading of 10 and coming in at its highest level since March. New Home Sales put a damper on the economic releases for the week, reporting sales of 571k new homes, below the estimate of 590k to 622k. Despite the weakness in July, upward revisions from the month of June offset the disappointing miss. Existing Home Sales followed the New Home Sales release, meeting the consensus range of 5.410M to 5.650M with an actual number of 5.440M.

Following a stumble into the end of last week, both the Dow and S&P 500 reversed and gained just less than 2% each in the first two days of this week. The push was primarily fueled by expectation the White House is making progress on tax legislation, which would cut corporate tax rates and bolster profits. Following the early rally, stocks pulled back through the middle of the week as more controversial issues such as NAFTA, the border wall and the Affordable Care Act replaced tax reform in the daily headlines.   After the roller coaster ride of a week, the S&P 500 settled in to make solid gains for the week, closing at 2,443.05.

The 10-year U.S. Treasury yield was up to 2.24% in the first half of the week as investors moved back into equities following a turbulent end to the prior week. As this week pressed on, however, the White House’s confrontational rhetoric concerning the issues reference above lured investors back into ‘safe haven’ assets such as government bonds and gold, driving yields back down to levels last seen in late June.   Federal Reserve Chairperson Yellen, remained silent with respect to interest rates in her comments at the annual economic summit in Jackson Hole.  Investors took the omission as a sign the Fed will continue to be patient in terms of normalizing interest rates.  As a result, the long bond yield declined into the week’s close, finishing at 2.17%.

Important economic releases in the upcoming week include GDP, PMI Manufacturing Index, ADP Employment Report, Dallas Fed Manufacturing Survey and Chicago PMI.


Weekly Market Commentary

August 14th – August 18th

Retail Sales made a strong recovery in July, advancing 0.6%, well ahead of the 0.4% consensus estimate.  Retail Sales Ex-Auto and the Control Group (factored into GDP) exceeded expectations as well at 0.5% and 0.6% respectively.  Equally important were the upward revisions to headline Retail Sales for June (0.3% from -0.2%) and May (0.0% from -0.1%).  Wiping off the negative print for June and strong July report should be expected to have a positive impact on the next revision to Q2 GDP estimate.  Regional manufacturing index Empire Manufacturing was much stronger than anticipated at 25.2 versus and estimate of 10.3.  The Philly Fed Business Outlook Survey was modestly ahead of expectations at 18.9 versus 17.0.  Housing starts fell -4.8% in July to a 1,155k annual rate.  The pullback was led by multifamily constructions which declined to a 10 month low.  Building permits declined during the month as well, off -4.1% to a 1,223k annual rate.  The declines in July followed larger than anticipated jumps for both metrics in June. 

U.S. equities experienced weakness from the mid-week point, rallied briefly following the announcement of Steve Bannon’s departure from the White House on Friday, then ended the trading session and week lower.  The S&P 500 started the week at 2,459 and closed at 2,425.  Risk was on again, off again, during the week based on geopolitical risks and turmoil in Washington further calling fiscal policy stimulus into question.

The yield on the 10 year U.S. Treasury rose during the week from 2.21% to an intra-trading session high of 2.28% mid-week before easing back to close trading at 2.19 on Friday.  The FOMC minutes provided little in the way of definitive timing relating to the next rate increase or balance sheet reduction.  Some new comments citing declining levels of inflation struck a dovish tone.  We continue to expect the fifth rate increase in the current tightening cycle to be held off until 2018. 

Important economic releases next week include New and Existing Home Sales, Richmond and Kansas City Fed Manufacturing Indices and the Chicago Fed National Index.


Weekly Market Commentary

July 31st – August 4th

Non-farm payrolls for July increased by 209k jobs, ahead of the 180k forecast.  The headline unemployment rate dropped back down to 4.3% from 4.4%, as was expected, while the underemployment rate held steady at 8.6%.  Average hourly earnings increased 2.5%, edging out an estimated 2.4% increase.  The PMI Manufacturing Index report of 53.3 indicated moderate growth and was slightly better than the prior of 52.  The ISM manufacturing report came in stronger at 56.3.  This was mostly driven by exports with high new orders and production while maintaining steady inventories.  Personal income remained flat with consumer spending ticking up 0.1% compared to last month, indicating consumers starting to dip into savings.

The Dow edged through 22,000 at midweek and closed the final trading session at another record high.  The S&P 500 finished the week a point below where it started at 2,476.  Corporate earnings releases for Q2 continue to be strong, however even the most minor piece of bad news seems to lead to selling pressure.  Despite the low level of “fear” in the overall market (as measured by the VIX Index) investors are reacting swiftly to individual company news. 

The yield on the 10 year U.S. Treasury closed the week within a few basis points of where it started as well at 2.26%.  The implied probability of an additional Fed rate hike in calendar year 2017 now stands at 39%.

Important economic releases next week include key measures of inflation (PPI on Wednesday and CPI Friday) along with Productivity and Labor Costs. 


Weekly Market Commentary

July 24th – July 28th

The first estimate of Q2 GDP was reported at 2.6% year on year, falling roughly in line with reduced expectations.  A favorable pick up in consumption was offset by declines in residential investment and business fixed investment.  An unusual fourth revision was also made to  Q1 GDP previously reported at 1.4%, now decreased to 1.2%.  Durable goods orders rose 6.5% in June driven by aircraft orders.  Excluding aircraft, order growth was a much more modest 0.2%.  Existing home sales declined 1.8% in June due to tight inventory levels and rising price levels more than lack of demand.  Existing homes for sale in the U.S. are at the lowest level since the mid-90s.  The National Association of Realtors Median Home Price jumped to a record high $263,800.   New Home Sales were steady at a 610k annual pace.

As expected, the two day FOMC meeting did not result in any change in interest rate policy.  Investors keyed in on post meeting comments that a balance sheet reduction is likely to begin “relatively soon.” 

In a week chock full of earnings announcements, individual U.S. stocks made some meaningful swings despite a relatively flat period for the overall market.  The S&P 500 index advanced early in the week before giving back gains during the trading sessions on Thursday and Friday to close the week roughly where it started at 2,472.  The Dow closed up just over 1% on the week.

Oil prices increased nearly 10% during the week based on discussions of Saudi output cuts with crude closing back at nearly $50 per barrel.  The ten-year U.S. Treasury yield reached an intra-session high of 2.34% midweek before settling back down to close the week at 2.29%.

Key economic releases next week include ISM and PMI manufacturing and services industries Index releases as well as updated employment data. 


Weekly Market Commentary

July 17th – July 21st

Regional manufacturing data softened with the Empire State survey falling short of expectations at 9.8 versus a 15.0 estimate.  The Philly Fed survey came in at 19.5 versus a 23.0 estimate.  Residential construction showed signs of strength with Housing Starts increasing 8.3% to a 1.22 million annualized rate, the fastest pace in four months.  Permits also increased by 7.4% to a strong 1.25 million annualized rate.  While a builders’ survey showed some concerns due to increased lumber costs (one of the few areas of inflation), shortages of buildable lots and skilled labor, homebuilding and permitting activity remains robust.

It was another positive week for U.S. equities.  The S&P 500 index closed the week at 2,472, modestly above where is started despite a pullback on Friday.  The modest decline in the NASDAQ on the final trading session of the week ended a streak of 10 consecutive positive trading days, the longest on record since February 2015.  Despite the good news on Housing Starts, homebuilders stocks pulled back based on concerns about further increases in lumber prices due to potential tariffs and weak construction expectations in the Atlanta Fed survey.  Amazon continued to show their appetite for disrupting brick and mortar retailers announcing a deal with Sears to deliver Kenmore appliances.  The VIX Index remained below 10 throughout the week signifying investors’ ongoing complacency. 

Bond yields declined throughout the week.  The ten-year U.S. Treasury ended the final trading session at a yield of 2.24% from 2.31% at the start.  The implied probability of a further rate hike in 2017 remains at 43%.

In addition to the FOMC meeting next week, key economic releases include the first look at Q2 GDP estimate, Durable Goods Orders, Existing and New Home Sales, Richmond Fed Manufacturing Index and the Chicago Fed National Activity Index. 


Weekly Market Commentary

July 10th – July 14th

Retail Sales for June fell -0.2%.  This was far weaker than expected and a second consecutive monthly decline.  With Q2 data now reported, Retail Sales growth is a fraction of Q1.  Expect the word “transitory”, used by the Fed to explain why consumption weakness was not a concern, to be a topic of debate.  CPI was unchanged in June although also lower than anticipated at 1.6% year-on-year change versus a forecast of 1.7%.  This is one of the weakest four month stretches in the 60 year history of the index.  Industrial Production in June modestly exceeded expectations up 0.4% driven by strength in the mining sector.

The Dow Jones Industrial Average finished the week at a new record high of 21,637, and the S&P 500 Index reached a new all-time closing high water mark of 2,459.  Financial stocks however, retreated on Friday despite strong earnings reports from large banks JP Morgan, Citi and Wells Fargo.  Cautionary comments about loan growth and net interest overshadowed strong bottom line results from the previous quarter.

Bond yields retreated modestly with the ten-year U.S. Treasury closing the week at 2.32%.  With no signs of inflations in the latest reports, investors bid up bonds, perhaps anticipating that the Fed may be rethinking another tightening move this year.  The implied probability of a further rate hike in 2017 now stands at 10% for September and 43% for December. 

Key economic releases next week include Housing Starts and regional manufacturing surveys from Philly Fed and Empire State. 


Weekly Market Commentary

July 3rd – July 7th

Despite the shortened week, there were numerous important economic figures released for the months of May and June.  We saw the ISM Manufacturing Index rise sharply to a reading of 57.80 last month, beating estimates of 55.30 and jumping to its best performance since August 2014.  New orders for manufactured goods did not fare as well, following its 0.3% decrease in April with a 0.8% or $3.7 billion decrease in May.

The unemployment rate rose to 4.4%, up from 4.3% in the month of May as more people entered the labor force in search of work.  Additionally, average hourly wages rose 0.2% to $26.25 per hour, missing the forecast of 0.3% and providing further evidence of low inflationary pressures in the economy. On a more encouraging note, hiring surged as non-farm payrolls increased 222,000 in the month of June, beating the forecast of 178,000.  Further emphasizing the strength of employment growth, private jobs increased 187,000 which beat the estimates of 170,000.

The S&P 500 finished the week at 2,425.18, down from 2,435.48 at the start of the week.  The S&P got off to a rocky start as weakness in tech continued, dragging the tech-heavy NASDAQ benchmark with it. Despite the lackluster start to the week, the S&P finished the week on a high note as stocks rallied due to the positive news about job growth.  Furthermore, the CBOE Volatility Index rose 13% on Thursday to close at its highest level since mid-May.

This proved to be another soft week for the ten-year U.S. Treasury as prices declined throughout the week.  The long-bond closed the week with a yield of 2.384%, up from 2.307% at market open on Monday. The steepening yield curve can be attributed to strong job growth as well as a global selloff in government paper after key central banks around the world alluded to the potential changes of their current easy-money policies.

Key economic releases next week include PPI manufacturing figures, the Baker-Hughes rig count, Consumer Price Index and Consumer Sentiment, among others.

Weekly Market Commentary

June 26th – June 30th

Q1 GDP was revised further upward to 1.4% from the prior revised estimate of 1.2%.  While still weak, the increase is a positive development during a period of relatively dour economic news.  Personal consumption was the key driver revised to 1.1% from 0.6%.  Estimates for Q2 GDP are closer to 3%.  Durable goods orders for May were weaker than expected, coming in at -1.1% versus an estimated -0.6%.  Commercial aircraft expenditures declined 12% in the month.  Durable goods ex-transportation was modestly positive at 0.1%, short of the 0.4% estimate however.  The FOMC’s key measure of inflation, the PCE, was reported at 1.4% year-on-year versus 1.7% previously. 

The S&P 500 declined modestly for the week, closing at 2,423.  Investors shifted interest from high flying tech stocks, which sold off, to financials which were bid up following favorable reports on bank stress tests.  The VIX dropped back below 10; the S&P 500 to VIX ratio, considered to be a measure of “market euphoria” hit new highs not reached since the mid-1990s.

The yield on the ten-year U.S. Treasury increased throughout the week rising from 2.15% to 2.30%, easing some of the curve flattening from prior weeks.  Continued declines in inflation call into question when the Fed may consider their next rate increase, however hawkish comments from central banks around the world led to an increase in longer-term global rates in major developed countries. 

Key economic releases next week include ISM and PPI manufacturing figures, Factory Orders, Non-farm Payroll and Unemployment. 


Weekly Market Commentary

June 19th – June 23rd

Housing was the focus of this week’s economic releases.  Earlier in the week existing home sales for May jumped to 5.62 million which translates to a 1.1% increase over April. Today new home sales came out 2.9% higher than April at 610 thousand for the month of May. Unfortunately, home supply has decreased on a year over year basis for 24 straight months. This supply shortfall has led to an all-time high median house price of $252,800. According to the National Association of Realtors (NAR), May had the shortest median number of days a home was on the market since the NAR began tracking this in 2011 with 27 days. 

The first round results of the Federal Reserve’s bank stress tests were released this week.  All 34 banks passed and may be eligible to increase dividend payments or participate in share buybacks based on the results of next week’s round of qualitative testing.  One area of concern noted by the tests thus far was the increase in subprime credit card customers possibly leading to decreased loan portfolio quality.

After the Dow Jones reached an all-time high on the 16th last week déjà vu occurred again this week.  The Dow Jones reached its all-time high closing at 21,529 on Monday.  Not to be outdone, the S&P 500 also reached its all-time high close of 2,454 on Monday.  Both indices were predominately driven by the rise in the IT sector.

Except for the short end of the curve declining a bit, the U.S. Treasury curve was essentially unchanged from the previous week.  The ten-year U.S. Treasury closed the week at 2.14% and has found much support at this level for the past few weeks.

Next week is action packed with economic releases, including first quarter GDP, durable and capital goods orders, inventories and more.


Weekly Market Commentary

June 12th – June 16th

The FOMC raised the Fed Funds rate by 0.25% to a 1.00-1.25% target as expected.  Balance sheet reduction to continue to dial down ongoing stimulus may begin later this year if the economy meets Fed projections, nearly nine years after the Emergency Economic Stabilization Act went into effect.  Under the plan, proceeds from a relatively small amount of bond maturities each month will no longer be reinvested, with this cap amount increased at a clearly defined pace on a quarterly basis to specified maximum levels.  The Fed is going to great lengths to communicate the plan well in advance to avoid a repeat “taper tantrum” in financial markets similar to 2013.  The UST 2-10 spread narrowed to only 80 basis points as the yield curve continued to flatten following the Fed announcement. 

Inflation measures continued to come in lower than anticipated.  The headline CPI number came in at 1.9% on a year-over-year basis relative to a 2.0% consensus estimate.  Core CPI ex-food and energy was reported at 1.7%, the lowest in two years.  Retail sales for May were weak, coming in at -0.3% versus an estimated 0.1%.  Spending fell off in department stores, restaurants, autos and gasoline.  Without consumer confidence flowing through to spending, higher Q2 GDP estimates may be called into question. 

The Dow closed the week in new record breaking territory at 21,384 while the S&P 500 was relatively flat closing at 2,433.  IT stocks continued their slide which began last week.  Amazon’s $13B bid for Whole Foods on Friday sent numerous stocks directly or indirectly related to the grocery business plunging. 

The ten-year U.S. Treasury yield closed the week with a yield of 2.16 close to where it started.  Following the Fed’s 25 basis point increase to the Fed Funds rate this week, the implied probability of an additional hike in September has decreased to only 22% and 43% for another hike in December. 

Key economic releases next week will be focused on housing with existing homes and new home sales reports. 


Weekly Market Commentary

June 5th – June 9th

Nonfarm productivity surprised on the upside, coming in flat versus estimates of -0.1%, and the prior report of -0.6%.  However, factory and durable goods orders showed slight decreases from prior levels.  The JOLTS report on job openings came in higher than estimated, indicating employers are struggling to find suitable hires, following headline unemployment reaching a 16 year high of 4.3%.  Markit PMI Composite and Services reports came in fairly in line with expectations, remaining in expansionary territory. 

Despite leaving rates unchanged, the ECB struck a hawkish tone, dropping all references to further cuts and signaling that further stimulus was unlikely.  Also notable was the U.K. snap election on Thursday, in which favored Prime Minister Theresa May and the Conservatives lost 12 seats from her former majority, the opposing Labour party gaining 31. Without a majority, May has been forced to form a coalition with Northern Ireland’s Democratic Union Party. Calling for the election has clearly backfired, weakening Britain’s position in upcoming trade renegotiations and creating further uncertainty.

After reaching new all-time highs last week, U.S. equities experienced some profit taking this week, with the S&P 500 closing marginally lower at 2,431.  The high flying IT sector experienced a significant sell off during the trading session on Friday, clipping some of the recent gains from the NASDAQ composite.

The ten-year U.S. Treasury yield increased from an intra-week low of 2.14 to finish the week at 2.20%.  The UST 2-10 spread stands at 0.87% with the short end of the curve pricing in a 0.25% hike in the Fed Funds rate next week. 

In addition to the FOMC meeting next week, key economic releases include CPI, Retail Sales and Housing Starts. 



Weekly Market Commentary

May 30th – June 2nd

Headline unemployment dropped unexpected by 0.1% to a 16-year low of 4.3%, however non-farm payrolls were disappointing at 138k, below the expected 182K forecast.  March and April jobs reports were also meaningfully reduced by 66k.  With job growth now at the slowest pace in five years and labor force participation declining to 62.7%, the key driver of the reduced headline unemployment figure was working age people dropping out of the work force.  Year on year average hourly earnings grew by 2.5%, showing nearly no real growth in wages.  PMI manufacturing came in at 52.7, modestly below the consensus of 53 and the prior reading of 52.8.  April marked an 8-month low for manufacturing as companies continue to reduce inventories. 

Inflation moderated as well, with the year on year Core PCE dipping to 1.5%, the lowest level since December 2015.  With inflation slowing and the probability for a June rate hike fully priced in, the expectations for a September rate hike are being called into question.

The Dow, S&P 500 and NASDAQ all closed the holiday shortened trading week at new all-time highs.  After an initial two negative trading sessions, the S&P 500 closed the week with a new high of 2,439.

The ten-year U.S. Treasury yield steadily declined throughout the week closing at a year-to-date low of 2.16% causing further flattening of the yield curve.  The UST 2-10 spread now stands at a historically low level of 0.87%.  Talk of a 3% Fed Funds Rate target sounds farfetched at these levels as inverting the yield curve is not the intention of the FOMC.

Notable economic releases next week include ISM and PMI services data and consumer credit.


Weekly Market Commentary

May 22nd – May 26th

The second estimate of Q1 GDP came in at 1.2%, higher than the original 0.7% reading and revised forecast of 0.9%.  Most economists are calling for a rebound in Q2 GDP after the slow start to the year.   April Durable Goods came in at -0.7%.  The decline beat the -1.5% consensus, but is not particularly encouraging as the first negative monthly print since November 2016.  New home sales came in lower than expected at 569k versus 610k, although with the rapid growth that has taken place over the past few years, home builders are struggling to obtain new buildable lots.  Existing home sales softened as well, falling 2.3% in April, slightly more than expected after a decade-long high was reached in March.  While U.S. factory activity slows modestly, the services industries continue to show robust growth as reported by the Market Purchasing Managers Index.  The FOMC minutes released this week were notable for the detail on “gradually increasing caps” aimed at unwinding the Fed balance sheet in a predictable manner.

U.S. equities broke into new highs with investor optimism growing due to strong Q1 corporate earnings.  The S&P 500 closed at a record high of 2,416.  U.S. equity volatility measured by the VIX plunged back into the single digits following the rapid spike last week.

The ten-year U.S. Treasury opened the week at 2.25%, climbed to a midweek high of 2.30% before settling back down following the release of the FOMC minutes and closing the week where it started at 2.25%. Despite recent weak economic data, the futures market is pricing in a 91% probability of a 0.25% hike to the Fed Funds Rate in June, with investors clearly agreeing with Fed comments that Q1 weakness is “transitory.”

Notable economic releases next week include employment reports and PMI manufacturing.  Both the U.S. stock and bond markets will have a shortened trading week next week due to the Memorial Day holiday.


Weekly Market Commentary

May 15th – May 19th

The week started off with negative news, as the Empire Manufacturing Index declined to -1.0, well-below the forecast of 7.5 and the first contraction since November.  This was in stark contrast to the Philadelphia Fed Business Outlook announcement on Thursday, which nearly doubled its forecast of 18.5, expanding to 38.8 while logging its’ tenth consecutive month of growth.  Industrial production for April was released on Wednesday and came in at 1.0%, ahead of the consensus estimate of 0.4%.  Lastly, capacity utilization increased from the prior month and above forecast at 76.7%.  Overall, the manufacturing sector has been on a solid run for the past several months. 

Housing starts declined by 2.6% to 1.17 million units, its second consecutive monthly decline and lowest level in five months.  Additionally, building permits declined by 2.5% to 1.23 million units.  The weakness was attributable to a big decline in apartment construction, which tends to be a volatile sector.  Nevertheless, housing construction continues to be a bright spot in the U.S. economy and with inventory levels at about half the historical average it is very likely that this is just a temporary decline in the still expanding housing sector.

U.S. equities began the week with the S&P 500 posting yet another all-time high of 2,402 on Monday.  However, the steady upward climb would come to a screeching halt on Wednesday, as early calls for a potential impeachment of President Trump resulted in a 40% increase in volatility and a 1.8% decline for the day.   Despite the weakness on Wednesday the S&P 500 posted consecutive days in the green, finishing the week down only .4% to 2,381.

The ten-year U.S. Treasury started the week at 2.34%, but declined to 2.22% on Wednesday as a result of the equity market decline and risk-off trade and ended the week up slightly at 2.24%.  The overall shape of the yield curve continued to flatten, as long-term rates have declined more than short-term rates.  The spread between the two-year treasury and ten-year treasury is only 97bps.

Notable economic releases next week include second-reading Q1-17 GDP, housing, durable goods, regional manufacturing, and the Federal Reserve meeting minutes.


Weekly Market Commentary

May 8th – May 12th

While the volume of data released this week was on the lighter side, the importance cannot be understated with regard to one of the Federal Reserve’s main tasks of keeping a watchful eye on inflation.  We saw the release of both consumer and producer price metrics and the results were somewhat contradictory.  On May 11th, we saw the Producer Price Index (PPI) come in at +0.5% month-over-month compared to a consensus prediction of +0.2% - a big win for economists looking for signs of inflation.  Supporting this number was strength in computers, cigarettes, hotel rooms, and brokerage fees.  In classic contradictory fashion, on the 12th we saw the Consumer Price Index (CPI) figures come in and disappoint.  While the numbers themselves were generally positive and fairly flat compared to consensus, the resulting premise of producers paying higher prices for inputs (PPI) yet not seeing that increase in final sales prices (CPI) could eventually lead to shrinking margins.

The second contradictory data points released this week were Retail Sales figures.  The strong consumer confidence numbers talked about in this column recently still have not translated into strong retail sales.  While we saw a slight recovery from a dismal past few months, it is not quite in line with the data suggesting a euphoric wave of positivity being felt by US consumers.  Vehicle sales were finally up after three straight monthly declines.  However, this was tempered by a third straight month of weakness in general merchandise sales.  We will be keenly focused on how the dichotomy of strong consumer confidence vs. weak retail sales plays out over the coming months.

Next week will be another fairly light week with housing statistics, industrial production, and regional manufacturing and business outlook numbers being released.

The S&P 500 Index closed the trading week down slightly at 2,391.  The NASDAQ continued its march into record territory closing at 6,121, while the Dow closed back under the 21k mark at 20,897.

The 10-year U.S. Treasury yield closed the week roughly flat at 2.33%.  The implied probability from the futures market of a 25 basis point increase to the Fed Funds Rate at the June F.O.M.C. meeting now stands at 97.5%.


Weekly Market Commentary

May 1st – May 5th

The Non-farm Payrolls report was strong on Friday, with 211k new jobs reported relative to the forecast of 190k.  The headline unemployment rate dropped to 4.4%, the lowest in 10 years.  Markets reacted positively to the turnaround in April data following weak March employment figures.  Average hourly earnings grew at a slow and measured pace of 2.5% year-on-year.  The ISM Manufacturing Index came in lower than expected marking a second consecutive decline from the 2.5 year high hit in February.  Services data was mixed with soft results from PMI and stronger results from ISM with a strong new orders component.  The F.O.M.C. met this week without making any rate changes or policy decisions.  The view from the Fed that the slowing consumption data reported from Q1 was “transitory” was the focal point of the post meeting statement. 

The S&P 500 Index closed the trading weak at a new record high of 2,399.  The NASDAQ continued further into record territory as well closing at 6,100, while the Dow closed back above the 21,000 mark.  Strong corporate earnings reports were well received by investors.

The 10-year U.S. Treasury yield closed the week at 2.35% after dipping as low as 2.28% in intraday trading midweek.  The implied probability from the futures market of a 25 basis point increase to the Fed Funds Rate at the June F.O.M.C. meeting now stands at 99%.

Notable economic releases next week include CPI and PPI inflation readings and April retail sales.  Numerous regional Fed Governors will be making the usual rounds next.  Expect the most dovish and hawkish outliers to receive the most press coverage. 

Weekly Market Commentary

April 24th – April 28th

The first estimate of Q1 GDP missed already low expectations of 1.1%, coming in at 0.7%.  This is the lowest pace of growth in three years driven by paltry consumer spending of 0.3%.  Weaker auto sales and lower home heating bills dragged spending down to the weakest reported quarter since 2009.  March Durable Goods orders also missed the consensus estimate coming in at 0.7%.  Ex-transportation the print declined by -0.2%, well below the 0.4% estimate and below the low end of the range.  Aircrafts were once again a key contributor to the headline number.  Housing continued to show signs of strength as new home sales of 621k exceeded the 588k consensus estimate.  New home prices and building permits continue to move higher, with available inventory of only 5.2 months. 

France’s first round presidential vote created optimism that the country may not follow Britain into an exit of the European Union.  The runoff election between centrist Emmanuel Macron and far right EU-exit advocate Marine Le Pen will take place in May. 

U.S. equities had a strong week as investors took a clear “risk on” stance.  The S&P 500 Index started the week at 2,373 and closed at 2,384.  The Index ticked past its record closing high of 2,395 during the trading session on Wednesday, but failed to close at a new record.  The NASDAQ Composite passed the 6,000 mark, the first thousand-point milestone for the Index since the dot-com era of 2000.  The Dow also revisited the 21,000 level during the week before closing at 20,940.  After appearing to begin to normalize for a brief period earlier in the month, the equity volatility index (VIX) declined below 11 during the week, indicating just how complacent investors are with risk. 

The 10-year U.S. Treasury yield vacillated between a low of 2.27% and high of 2.34% before closing the week at 2.29%.  Yields declined on Friday following the weaker than expected GDP report. 

Notable economic releases next week include PPI and ISM Manufacturing and Services Indices and Factory Orders.  The FOMC meets on Tuesday and Wednesday.  Markets are not anticipating any movement in rates at this meeting.


Weekly Market Commentary

April 17th – April 21st

The Markit U.S. Composite Preliminary PMI Index registered a 52.7 in April, below March’s reading of 53.0.  The reading was the weakest rate of growth in 7-months, as the private sector has lost some momentum since the Presidential election. 

The pace of U.S. manufacturing growth has moderated from the near two-year peak reached in January.  The Markit U.S. Manufacturing Preliminary PMI Index expanded at a rate of 52.8 in April, down from 53.3 in March and the slowest rate of growth in 7-months.  A slower rate of output and new order growth were the biggest detractors to the monthly index.  Additionally, regional surveys confirm the national results experiencing a slower rate of growth as well, including the Empire Manufacturing Index at 5.2, down from 16.4, as well as the Philadelphia Fed Business Outlook registering a 22, down from 32.8 in March. 

The Markit U.S. Services preliminary PMI Index expanded at a slower rate in April to 52.8, down from 53.3 in March and similar to the manufacturing reading was also a 7-month low.  Subdued demand and weaker production attributed to the decline.  Despite the decline, service providers remain upbeat about their prospects over the next 12-months.

The housing market continues to improve, attributable to the continued strength in the labor market, consumer confidence and still historically low interest rates.  Existing home sales for March increased to the highest pace in over ten years to 5.71 million units, up 5.9% from a year ago.  The biggest headwind to the housing market remains the lack of inventory that has experienced 22 straight months of year-over-year declines representing 3.8 months of supply at the current pace.  This has contributed to a steady increase in the median home price now at $235,400, up 6.8% from a year ago and the 61st consecutive year-over-year gain.  More inventory is on the way as building permits increased to 1,216,000 in March, a year-over-year increase of 17%.

Americans confidence eased slightly over the previous 4-weeks, with both the Bloomberg economic expectations and consumer comfort indexes declining.  Despite the weaker readings both indexes remain near post-recession highs. 

U.S. equities experienced an up and down week, peaking on Thursday and driven by several strong earnings releases.  The S&P 500 Index finished the week within a couple points of where it started at 2,348.

U.S. Treasury yields declined to an almost 5-month low of 2.16% on Tuesday, driven by nervousness over the first round of presidential elections in France, slowing economic data, and fading confidence in the Trump administration’s ability to pass expansionary policies.  The 10-year U.S. Treasury started the week at 2.24% and ended at 2.23%.  The overall shape of the yield curve was unchanged, as the difference between the 2-year treasury yield and 10-year treasury yield was unchanged at 1.05%.

Notable economic releases next week include housing, durable goods, regional manufacturing, and the advanced estimate for 1Q17 GDP.


Weekly Market Commentary

April 3rd – April 7th

The ISM Manufacturing Index continues to be well into expansionary territory with the latest report of 57.2 meeting consensus estimates.  The employment and prices paid components of the release were particularly strong.  Hiring within the auto sector however, has shown signs of slowing.  The auto inventory to sales ratio has ticked up as well to the highest level since 2009.  The industry boom from dealer incentives and attractive financing deals may have come to an end.  The ISM Non-manufacturing Index was reported modestly lower than estimated, but at 55.2% continues to be expansionary as well.  The Markit Service Sector Activity Index lost some momentum as well following a strong peak in January. 

The ADP employment report midweek surprised on the upside with 263k reported versus 185k expected.  Small business, construction and manufacturing hiring were particularly strong.  The Nonfarm Payroll report on Friday however, delivered some unexpected mixed results.  Job increases of 98k were well below expectations with a 30k decline in brick and mortar retail jobs in March weighing down the total (following a 31k decline in February), but the headline unemployment number fell to a near 10 year low of 4.5% as employers hired more workers than they fired overall.  Wages rose 2.7% year on year as expected, modestly slower than the previous month.  The underemployment rate, including those working part time while seeking full time work, continued to move modestly lower to 8.9%.

The U.S. launched an airstrike against a Syrian airbase in response to the belief the Assad regime used banned chemical weapons against its own civilians raising geopolitical tensions.  The probability of an ECB rate hike occurring this year plunged from 55% to only 15% on softer inflation measures.  The continuation of accommodative monetary policy is likely to be a tailwind for European markets. 

U.S. equities experienced an up and down week, peaking through mid-week then selling off late in the session on Wednesday following the release of the FOMC minutes.  The S&P 500 Index finished the week within 10 pts of where it started at 2,356.

U.S. Treasury yields declined early in the week following the slowing vehicle sales report, traded within an 8bp range then shifted back up in the final session.  The 10-year U.S. Treasury started the week at 2.40% and ended at 2.38%.  The shape of the yield curve steepened mid-week following the release of FOMC minutes that showed officials agreed that they would likely begin reducing the Fed’s $4.5T balance sheet of bonds later this year by not reinvesting as some bonds mature. 

Notable economic releases next week include retail sales along with CPI and PPI inflations measures.  U.S. markets are closed next Friday in observance of Good Friday.


Weekly Market Commentary

March 27th – March 31st

The Conference Board’s U.S. Consumer Sentiment Index hit a 16 year high.  Whether this optimism will carry through to real consumer spending will be an area of closely monitored interest.  Brick and mortar retail companies have been a significant laggard relative to strong overall stock returns for the past year.  Following the Conference Board reading, the Bloomberg U.S. Surveys and Business Cycle Indicators Surprise Index jumped to the highest level in six years.  The third and final reading of Q4 GDP was revised upward from 1.9% to 2.1% based predominantly on an upside surprise in personal consumption from 3.0% to 3.5%.  The trailing four quarter average GDP is now a modestly higher 2.0%.  Richmond Fed Manufacturing Index expanded for the fifth straight month, well ahead of consensus.  Dallas Fed Manufacturing Survey trailed consensus in March after a meaningful surge last month.  The Fed’s preferred measure of inflation, the PCE, was reported Friday showing a 2.1% year-on-year change, surpassing the Fed’s 2% target.  This is the highest annual reading since March 2012.

Nine months after Britain voted to leave the European Union, Article 50 was formally enacted this week beginning the process of the UK exit.  A period of complex separation and trade pact negotiations expected to last two years will now begin. 

U.S. equities broke out of a short-term slump, advancing for the week.  The S&P 500 Index began the week at 2,326 and ended at 2,363.  The NASDAQ index broke through a new high.  Trading based on pro-growth reflation speculation experienced a short-term pause in momentum following the collapse of the attempted overhaul of the Affordable Care Act. 

U.S. interest rates expanded modestly during the week.  The 10-year U.S. Treasury began the week at 2.36% and closed at 2.39% after reaching 2.43% during intra-day trading on Friday.  Consensus seems to be growing for the expectations of two further Fed rate increases during the calendar year, despite the fact that the outlier hawkish Fed Governors receive the most media attention. 

Notable economic releases next week include ISM Manufacturing and Services, Factory Orders and ADP employment.


Weekly Market Commentary

March 20th – March 24th

Existing home sales pulled back in February after a near decade high achieved in January.  Sales fell -3.7% from January, but were still 5.4% higher than February 2016.  Available inventory rose modestly from 3.5 to 3.8 months.  New homes sales were far stronger, increasing 6.1% in February.  A decline in the median new home price suggests that builder concessions may have played a factor in the strong results.  Available inventory declined modestly from 5.6 to 5.4 months.  Demand remains robust, but rising prices and mortgage rates may lead to a more controlled trajectory of sales.  Headline Durable Goods orders exceeded the consensus estimate of 1.5% coming in at 1.7%.  January data was revised upwards as well to a very strong 2.3%.  Much of the strength in the numbers comes from transportation, particularly aircraft.  The core capital goods component (nondefense, ex-aircraft) was far less impressive in February declining -0.1% vs. an estimated 0.5%. 

Republican efforts to repeal the Affordable Care Act stumbled with a vote deferred on Thursday, then the bill was pulled on Friday when it became clear it lacked adequate support to pass.

The S&P 500 Index opened the week at 2,375 and finished lower at 2,344.  After a modest gain to start the week, the index suffered a rare greater than 1% loss on Tuesday, with traders citing concerns that the “reflation” trade may be overdone in light of the healthcare repeal debate.  Stocks moved sideways within a fairly tight range for the remainder of the week.

The 10-year U.S. Treasury began the week at a 2.50% yield and ended at 2.41%.  Yields fell off considerably on Tuesday with a flight to safety into the U.S. Treasury during the equity sell off.  Demand for Treasuries firmed throughout the week driving yield on the 10-year as low as 2.38% mid-day on Wednesday. 

Notable economic releases next week include updated Q4 GDP data, regional manufacturing readings and Personal Income and Outlays. 


Weekly Market Commentary

March 13th – March 16th

The Fed raised short-term interest rates for the first time in 2017 and third time in this rate cycle (December 2015, December 2016) as expected.  The Fed Funds target now stands at 0.75%-1.00%.  Comments from FOMC Chair Janet Yellen maintained the stance that two additional rate hikes are planned for later in 2017.  The Fed also left their forecast for 2017 GDP growth unchanged at 2.1%

The year-on-year headline PPI reading exceeded consensus and reached a five year high at 2.2% versus an expected 1.9%, although the Core PPI (ex-food and energy) was more benign at 1.6%.  The year-on-year change in the headline CPI (2.7%) and Core CPI (2.2%) both met consensus estimates.  February Retail Sales also met expectations at 0.1% while the January figure was modified from 0.4% to 0.6%.  Housing starts in February rose a better than expected 3%, while January was revised modestly upward.  Building permits fell 6% in February, but January was revised upward.  The milder than usual weather in January was a positive catalyst for home construction.  Housing continues to show signs of strength despite prices rising well ahead of wage growth and decreasing inventory levels.

The S&P 500 Index opened the week at 2,372 and finished the Thursday session, at the time of this writing, at 2,381.  The S&P has now had 107 consecutive trading sessions without a 1% or greater loss.  This streak is approaching the 110 day record set in 1995.  Fourth quarter earnings of the index grew at an impressive rate of 6.3%.

The 10-year U.S. Treasury began the week at a 2.56% yield.  Bonds yields searched for equilibrium prior to the Fed announcement reaching a high of 2.63% then dropping back to 2.53% as of this writing.  Rates shifted downward across the curve from 3 months through 30 years following the Fed decision.  Despite no change in forward projections or the Fed “dot plots”, the probability of three rate hikes in 2017 priced into the futures markets dropped a bit to 54% from over 60%.

Notable economic releases next week include Current Account, Existing and New Home Sales and Durable Goods Orders.


Weekly Market Commentary

March 4th – March 10th

This week was all about the employment report released Friday morning and it didn’t disappoint.  Fed Chair Janet Yellen signaled earlier in the week the Federal Reserve’s desire to increase interest rates “if the data continue to come in about as we expect”.  The solid jobs report, the last major economic report Fed policymakers review before their March meeting, makes the rate hike a 93% virtual certainty, according to the CME Group’s FedWatch tool.  This was up from 89% just a day earlier.

The U.S. economy added 235,000 jobs, beating the consensus of 200,000 predicted by leading economists, and almost topping the range of 162,000 – 240,000.  Adding to the strength of the headlining February number was the revision of January’s data from 227,000 to 238,000, which produced the best back-to-back months since the summer of 2016.  Highlights from the Non-farm Payrolls number were the construction industry’s contribution of 58,000 jobs, and increases in manufacturing and healthcare hiring.  Other positive notes from the report showed the unemployment rate down to 4.7% (an eight year low), and the U6 “underemployment” number, some would say the broadest measure of the employment situation, falling 0.2% to 9.2%.  U6 takes into account part-timers and those employed at jobs beneath their skill set.  As a point of reference, prior to the Great Recession, this number was hovering around 8%.  A slight disappointment was the average hourly earnings coming in at 0.2% when consensus was 0.3%.  However, this positive number only adds to the strong year-on-year rate currently at its fastest pace since the recovery began.

Other notable events from this week include the Trade Balance Level, coming in at expectations and signaling a surge in consumer and vehicle imports and higher imported energy prices.  Crude oil inventories are on the rise, factory orders (ex-transportation) were disappointing, and Jobless Claims remained remarkably low, leading to Friday’s strong Non-farm Payrolls report.  

The S&P 500 Index opened the week at 2,383, fell early during the week, but finished strong to end slightly down at 2,372.  The Healthcare and Technology sectors were positive, but strong declines in the Energy, Real Estate, and Utilities sectors weighed on the index.  The Dow pulled back from the highs of 21,000+ last week to end the week down slightly at 20,903.

The 10-year U.S. Treasury began the week at a 2.48% yield and ended at 2.56% as bonds, once again, sold off.  The 2-year Treasury yield continued to advance, hitting another multi-year high and ending the week at 1.34%.  The 5-Year Treasury yield advanced further to 2.10% causing the short end of the curve to further steepen.  As mentioned earlier, a 25 bps rate increase announcement at the March 14-15 FOMC meeting is a virtual certainty following Janet Yellen’s comments and the strong employment report. 

Notable releases next week include PPI/CPI data, housing starts, retail sales, industrial production, and the aforementioned FOMC rate decision. 


Weekly Market Commentary

February 27th – March 3rd

U.S. Consumer Confidence was reported at the highest level since 2001, although the positive sentiment did not carry through to many of the numerous data points released during the week.  Early in the week Durable Goods excluding transportation was disappointing at -0.2% for January versus expectations for an increase of 0.5%.  Consumer spending rose less than expected during the month with inflation-adjusted purchases down the most since 2009.  The second reporting of Q4 GDP came in unrevised at 1.9%, despite expectations of a 0.3% upward revision.  Consumption, driven in part by autos, was revised modestly higher, but offset by downward revisions to investment, net exports and government spending.  PCE came in at a 1.9% year on year increase, just below the Fed’s 2.0% inflation target.  The Core measure excluding food and energy increased 1.7% during the same period.  U.S. home prices rose more than expected as measured by the Case-Shiller 20-City Composite, furthering the gap between housing prices and wage growth.  In more positive news, manufacturing expanded with the ISM measure increasing for a sixth straight month to 57.7, well above 50, considered to be indicative of positive growth.  The reading aligns with strong regional manufacturing reports this month from Philly, Empire, Chicago and Dallas.  ISM services also increased to 57.6, exceeding expectations.  Initial jobless claims hit the lowest level in 44 years. 

The S&P 500 Index opened the week at 2,364 and kept the drive to new highs alive closing at 2,383.  With 92% of the companies in the S&P 500 now reported, Q4 corporate earnings rose 4.9%.  The Real Estate, Information Technology and Utilities sectors all had double digit earnings growth (with the majority of companies reported thus far), while Energy companies continued to be a headwind with a collective -9% decline.  The Dow continued its meteoric rise into record territory surpassing the 21,000 mark for the first time.

The 10-year U.S. Treasury began the week at a 2.32% yield and ended at 2.48% as bonds sold off.  The 2-year Treasury hit a multi-year high ending the week at 1.30% as the shape of the yield curve steepened.  The probability of a rate hike at the next Fed meeting in March jumped to 90%.  Expectations of Fed action increased throughout the week following the (commonly) hawkish comments of Fed Governors Dudley from New York and Williams from San Fran.  More fiscal “reflation” talk, the strong jobless claims number and the PCE inflation number just shy of the Fed target contributed to rising rate expectations as well. 

Notable releases next week include Factory Orders, Consumer Spending and Productivity. 


Weekly Market Commentary

February 20th – February 24th

Economic reports were mixed this week.  The Markit Services PMI report came in modestly below consensus.  The Chicago Fed National Activity Index also underperformed expectations declining -0.05%.  Existing Home Sales continued on a positive trend and were well ahead of expectations, increasing 3.3% during the month to a 5.69mm rate.  New Home Sales reported later in the week however, came in below expectations at a 555k annualized pace, including downward revisions for the prior three months which shaved 27k off previously reported figures. 

The S&P 500 Index opened the holiday shortened trading week at 2,358 and advanced during the week to close at 2,367.  As reported in the FT, the S&P 500 surpassed 90 days without closing down lower than 1%.  With a late session rally on Friday, the Dow extended its streak of consecutive record high closes to 11 days.  Beyond the speculation of future fiscal stimulus, investors had tangible data to digest with numerous positive fourth quarter company earnings.  With over 400 companies in the S&P 500 reported, average earnings growth has been a positive 5.6%.

The 10-year U.S. Treasury began the week at a 2.42% yield and finished lower at 2.32%.  Regional Fed Presidents received their share of airtime and headlines during the week as they shared their own, non-consensus, opinions for Fed watchers to read into.  The minutes from the prior FOMC meeting were released on Wednesday which left investors to determine their own interpretation of the meaning of the phrase “fairly soon” with respect to the next rate increase.  At least one reporter at the WSJ read it as particularly hawkish with the front page headline on Thursday reading “Fed Eyes Aggressive Rate Increases.”  Deferring to the futures markets, there is currently a 40% probability of a rate hike at the Fed’s March meeting and 61% probability of a hike in May. 

Notable releases next week include Durable Goods Orders, Revised Q4 GDP and ISM and PMI Manufacturing Indices.


Weekly Market Commentary

February 13th – February 17th

Inflation measures rose during the month of January.  The PPI increased 0.6%, doubling the consensus estimate.  This is the largest monthly rise since 2012.  The energy component jumped 4.7%, including gasoline prices which spiked up 12.9% in the period.  CPI rose a similar 0.6%.  The headline number was dominated by energy as well, with the Core CPI (ex food and energy) increasing 0.3%.  The increase in the Core CPI over the last three months is the largest since 2011.  On a year-on-year basis, CPI advanced 2.5% and Core 2.3%.  While these levels are not of concern, Fed rate watchers will be focused on the next PCE report (the preferred inflation measure of the FOMC) to see if that measure surpasses the Fed’s 2% annual inflation target as well.  Retail sales grew ahead of consensus by 0.4% in January and the December reading was revised upward to 1.0%.  December’s strong reading shows signs of consumer spending potentially catching up with the high levels of consumer confidence.  Housing starts declined -2.6% to an annual rate of 1246k, modestly outpacing consensus.  Even with the pullback, starts are 10.5% higher in the first month of 2017 than 2016.  Building permits rose 4.6% to an annual rate of 1285k, well above expectations and in line with the positive NAHB home builder sentiment index.  Regional purchasing managers’ indices showed notable signs of strength this week.  The Philly Fed manufacturing index shot up to the highest level in 33 years.  The Empire manufacturing reading was well ahead of consensus as well.  How much these regional manufacturing measures overcome the soft industrial production report (-0.3% in January) and carry into the next reading of the national ISM Manufacturing Indices will be of keen interest.

U.S. equities continued to surpass record highs through mid-week, paused for a brief period of profit taking then finished off a fourth straight week of gains.  The S&P 500 Index opened the week at 2,323 and closed at a fresh high of 2,351.

The 10-year U.S. Treasury began the week at a 2.41% yield, rose to 2.51% on Wednesday before closing the week back at 2.42%.  Fed Chair Janet Yellen’s congressional testimony this week struck a hawkish note at times, warning that delaying rate increases could be detrimental to the economy, although she falls in a more dovish camp than some other FOMC members on unwinding the Central Bank’s bond buying program. 

Multiple regional Fed Presidents will be speaking throughout the week next week to provide their personal, non-consensus, view on Fed policy, sure to have ample media sound bites.  Key economic releases include Existing and New Home Sales, Chicago Fed National Activity Index and Consumer Sentiment.  Official minutes from the last FOMC meeting will be released as well.  Both the U.S. equity and bond market will be closed on Monday for President’s Day.


Weekly Market Commentary

February 6th – February 10th

The U.S. labor market continues to strengthen, as evidenced by both continuing claims and the Job Openings and Labor Turnover Survey (JOLTS).  Continuing claims 4-week average declined to 234k, which is a 43-year low, as the decline in layoffs has greatly contributed to net job creation, while the JOLTS number of 5501k was almost unchanged from the strong prior month report.  Not surprisingly, sentiment has continued to improve as the labor market and U.S. economy continue to strengthen, confirmed by strong readings in both the Bloomberg Consumer Comfort Index and the University of Michigan Sentiment Index.  Wholesale inventories grew as well, with a 1.0% increase in January.

U.S. equities notched minimal gains through Thursday however, comments from President Trump vowing to decrease government regulation and lower tax rates for businesses pushed the S&P 500 to another all-time high on Friday.  The S&P 500 finished the week 0.9% higher than it started, closing at 2,316.

The 10-year U.S. Treasury bond began the week at 2.43%, traded down to 2.32% on Wednesday and slowly increased to close the week almost unchanged at 2.41%.  After the initial spike in interest rates post-election, the 10-year Treasury appears to have settled within a range of 2.3%-2.5% since the beginning of the new year and is likely to continue to be range bound until new economic data warrants another move in either direction.

There are a considerable number of economic releases next week for the month of January.  These include, Producer and Consumer Price Inflation, Retail Sales, Housing Starts, and several regional manufacturing gauges. 


Weekly Market Commentary

January 30th– February 3rd

The U.S. manufacturing sector had a strong start in 2017.  Despite exports being subdued by a strong U.S. dollar, domestic demand drove PMI production to the highest level in two years.  Inventories rose at the fastest rate in nearly a decade.  The ADP employment report was strong midweek followed by a non-farm payroll report on Friday of an increase of 277,000 jobs, well ahead of estimates.  Wage growth however, was weaker than expected at an annual rate of 2.5%, the lowest reported since August.  Revisions to the prior two month’s payroll figures subtracted 39,000 jobs.  Labor Force Participation was reported at 62.9% signifying that slack remains in the labor market.  Headline unemployment ticked up a tenth to 4.8%, still modestly below the September 2016 reading.  The FOMC left rates unchanged following their two day meeting this week.  While the post-meeting statement made an acknowledgement of improving consumer and business sentiment, the report lacked any new insights.

U.S. equities traded sideways to modestly negative for most of the week until Friday.  The release of numerous positive economic data points along with an executive order from the President to begin scaling back Dodd Frank regulatory reform led into the strongest trading session of the week.  Financial shares, the second largest component of the S&P 500 Index, led the rally.  The S&P 500 finished the week 0.7% higher than it started, closing at 2,297.

Despite finishing the week exactly where it started at 2.48%, the 10-year U.S. Treasury bond yield traded in a range with a high of 2.51% to a low of 2.43% during the previous five trading days.  Rates vacillated along with a slew of economic reports during the week, however the Fed provided no new direction on rate moves in their post-meeting comments. 

Notable economic releases next week include Consumer Sentiment reports, Labor Markets Condition Index and Import/Export Prices. 


Weekly Market Commentary

January 23th– January 27th

Of all of the economic data released this week the preliminary 4th quarter GDP figure was the most significant.  The preliminary number came in below the 2.2% consensus estimate at 1.9%, bringing 2016 GDP to a mediocre 1.9% for the year.  Consumption, the main component of GDP, increased 2.5% for the quarter, trailing the previous two quarters.  While replenishing inventories were accretive to GDP, it was more than offset by the jump in the trade deficit.  The decrease of exports and the increase of imports are related to the relative strength of the U.S. dollar to other currencies as well as the reduction in the one-time spike in soybean exports to China which gave a meaningful boost to Q3 final sales.  Preliminary December Durable Goods Orders were reported at -0.4%, also falling well short of expectations, driven by a significant decline in defense spending. 

The U.S. equity markets reached some milestones this week with the Dow Jones Industrial Average breaking the 20,000 mark for the first time.  The S&P 500 was not to be outdone hitting a 52 week high midweek and closed up 1.1% for the week.

Similar to last week’s U.S. Treasury bond movement, the 10-year U.S. Treasury bond sold off to reach 2.55% towards the end of the week before falling back to 2.48%.  Some uncertainty regarding the Fed’s future reinvestment of maturing securities in the QE portfolio and the resulting pressures on bond yields remains a topic amongst traders.

Next week will be packed with numerous economic releases as well as an FOMC meeting and announcement.  Noteworthy data points include Personal Consumption Expenditures (PCE), ISM and PMI Manufacturing and Services, unemployment and payroll numbers.


Weekly Market Commentary

January 17th– January 20th

The CPI figures released this week showed inflation increased 2.1% on a year-on-year basis.  The headline number was driven by a rise in energy prices which have now posted four consecutive strong monthly gains.  Core inflation (excluding the volatile food and energy sectors), which had been outpacing the headline number since the significant decline in oil prices in 2014, is now nearly in line with overall CPI, posting a 2.2% annual increase.  Signs of moderately-paced inflation may lead to more data gathering than action on the part of the FOMC early in 2017, despite comments by Chairwoman Janet Yellen this week that rates may rise “a few times a year” into 2019.  An increase in the Philly Fed Outlook showed an expectation of gains in the factory sector.  Initial jobless claims declined by 15,000 to a lower than expected level of 234,000.

The U.S. equity market was flat for the week with the S&P 500 opening at 2,276 on Tuesday (due to the Monday holiday) and closing at 2,271.  After declining early in the week, the index moved into positive territory late in the trading session on Thursday prior to the Presidential inauguration, but gave back the modest gains by the close on Friday.

U.S. Treasury bonds sold off during the week with the yield on the 10-year U.S. Treasury increasing from 2.37% to a high of 2.51% before settling back down to 2.47%.  A report of a decline in Chinese holdings of U.S. Treasuries (-$66bn in November, the sharpest one month decline in the past five years) added selling pressure. 

Next week the awaited release of the first estimate of Q4 GDP is released on Friday along with durable goods orders for December.  Redbook data will be released providing trailing comparables for consumer spending in brick and mortar stores.  Additional manufacturing data will be released with the PMI and Richmond Fed manufacturing indices. 


Weekly Market Commentary

January 9th– January 13th

The release of November consumer credit data showed increased borrowing by consumers, which ties in with rising measures of consumer confidence.  Headline retail sales for December (providing a first look into holiday spending) increased roughly in line with expectations, 0.6% versus an estimated 0.7%.  The increase was driven primarily by spending on autos, gasoline and online shopping.  The “control group” (which most closely ties to GDP estimates) however, rose a modest 0.2%, half the expected increase of 0.4%.  Excluding autos and gasoline, the monthly figure declined -0.03%, the first negative reading since July.  The increase in auto sales for the month of 2.4% was the largest since April, likely due in part to dealer discounts.  Autos unit sales volumes in 2016 posted the strongest post-recession calendar year increase, edging out the previous record from 2015.  December producer prices (PPI) for December increased 0.3%, in line with consensus expectations.  JOLTS job openings data showed that new positions available continue to increase at a faster pace than hiring. 

The U.S. equity market ended the week roughly where it started with the S&P 500 closing at 2,275.  The index recovered from a decline that bottomed at 2,254 early in the trading session on Thursday.   Positive earnings reports, particularly from financial companies, drove the rebound.

The 10 year U.S. Treasury yield declined modestly from 2.42% to 2.40% during the week.  Treasury yields hit an intra-trading session low early on Thursday at 2.31% then rose following the release of retail sales and PPI data on Friday. 

Next week will be a shortened trading week for U.S. stocks and bonds due to the MLK holiday.   December consumer price index (CPI) will be released mid-week providing an additional data point to inflation watchers.  The Philly Fed Business Outlook Survey along with the Bloomberg Consumer Confidence reading will be released, as will updated figures on industrial production, housing starts and jobless claims.


Weekly Market Commentary

January 3rd – January 6th

The first week of 2017 contained only a few economic releases leading into the BLS labor report released Friday morning.  Among the items releases earlier in the week, manufacturing posted solid performance during the month of December according to both the PMI and the ISM Manufacturing Indices.  The ADP employment report came in at 153,000 jobs created during the month of December, which was 19,000 below consensus.  Construction spending increased during the month of December, continuing a trend of latter half strength after a slow start in 2016.  Friday’s BLS labor report confirmed the ADP reading coming in at 156,000 new jobs which was also slightly lower than forecast.  The unemployment rate rose from 4.6 to 4.7% on a slightly higher labor force participation rate.  Perhaps the best news was continued upward pressure on wage growth which has been very slow to recover throughout this cycle.

After posting three down days to end 2016, the S&P 500 index posted two solid days of gains to open 2017.  The broad market index gave a little back before the release of the employment data on Friday morning, but remained close to all-time highs.  The steady employment number along with higher wages fueled a solid day on the equity markets with the S&P 500 closing at 2,277, recording another all-time high.

After peaking in mid-December at 2.60% long-term bond yields moved modestly lower into the end of the year, finishing with a yield of 2.45%.  This trend continued into the New Year with yields falling another .08% to 2.36% through Thursday’s trade.  Stronger wage growth spooked bond investors as accelerating wage growth generally is a leading indicator of inflationary pressure.  The long-bond sold off during the day, closing with a yield of 2.42%

While next week is not particularly “data-heavy” a few key reports will be released including Consumer Credit, Retail Sales and Consumer Sentiment.  Consumer Sentiment has been particularly strong since the election.  The last reading of the Conference Board confidence number was the highest since before Sep. 11, 2001.


Weekly Market Commentary

December 27th – December 30th

Another holiday shortened trading week brought little new information to the table.  In terms of economic data a few regional surveys suggested the economy continued to expand at a healthy clip during the month of December.  Additionally, consumer confidence continued to rise dramatically during the month, boding well for consumer activity heading into 2017.

After opening up the week on a positive note, equity markets pulled back on the final three trading days.  The S&P 500 lost 24 points for the week, or 1.06%.  The broad market index closed the year at 2,239 which was 33points below the all-time high of 2,272 set on December 13th.

Interest rates also declined as the 10-year U.S. Treasury yield dropped by .09%, closing the year at 2.45%, after reaching 2.60% on December 16th.

The team at Plimoth Investment Advisors wishes you and your families a Healthy and Happy 2017!


Weekly Market Commentary

November 19th – December 23rd

A few important data releases were spread across the week.  The PMI Service report declined slightly from the prior month, but still indicated steady purchase orders during the month of December.  Durable Goods Orders declined during November, however, the decline was centered in the volatile areas of transportation and defense while “core” order remained positive. Existing Home Sales for November continued at a healthy pace.  While consumer confidence was high during November, personal income and spending data came in weaker than anticipated.  Finally, the final revision to 3rd quarter GDP, came in at an annualized 3.5%.  This is the best reading in over two years.  It appears as though the economy bounced back from the sluggish first half of the year.

After making a solid run at the 20,000 level over the first two trading days, enthusiasm waned mid-week.  Considering the Dow Jones Industrial Average closed at 18,260 the day before the election, the post-election run of 1,674 points or 9.17% on the blue chip index has been impressive by any measure.  Clearly, investors are anticipating changes that would be considered pro-business, driving investors into growth assets in the expectation of greater earnings and profitability.  To be sure, the President-Elect’s cabinet choices support the notion that the administration is going to focus on economic development, employing a strategy of a “rising tide lifts all boats.”  However, we must keep in mind that policy decisions in 2017, will not likely impact aggregate economic activity for several months.

The bond market was relatively quiet as 10-Year US Treasury Yields declined slightly during the course of the week, opening at 2.60% and finishing at 2.54%.


Wishing you all the best this Holiday Season!

          -Your team at Plimoth Investment Advisors


Weekly Market Commentary

November 12th – December 16th

After stringing together several weeks of generally positive economic news, the few data points released this week were relatively soft.  November Retail Sales were slightly below analyst forecasts.  While November Industrial production also fell short of analyst’s projections.  Toward the tail end of the week two regional manufacturing (New York and Philadelphia) and one national survey all pointed to stronger December activity.

The big news for the week came in the form of the Federal Reserve’s decision to increase the Fed Funds rate by .25%.  This was not at all unexpected as moderately firmer data combined with the post-election equity market run gave the Fed Governors all the cover they needed to increase rates.  From an outlook perspective, the Fed forecast 3 rate hikes in 2017.  However, the language remained guarded in terms of certainty as the decisions remain “data dependent”.  We must remember, this time last year the Fed projected 4 hikes, but gave us only the one agreed upon earlier this week.

For the week, stocks traded between relatively small gains and losses.  The S&P 500 opened the week at 2,260.  By the close of trading on Friday the broad market index was almost unchanged at 2,259.  Six months ago, one would have expected weaker equity markets during a week which the Fed raised rates.  However, this increase was highly anticipated and the forward guidance concerning rates did not send off any alarm bells.  Further, the post-election momentum seems to have insulated markets from “bad news”.

While the S&P 500 took a break from the recent climb, interest rates did not.  10-Year U.S. Treasury yield opened the week at 2.46% and closed 14 basis points higher at 2.60%.  Most of the increase took place Tuesday and Wednesday when the Fed was holding their meetings.

Since the election, investors have bid up equity markets in anticipation of pro-growth policies from the new administration.  Similarly, interest rates have moved higher in anticipation of Federal Reserve actions to normalize rates in an environment of potentially higher growth and possible inflation.  However, uncertainty remains over precisely what policies will be enacted and when.  We also know that policy changes impact the real economy on a lagging basis.  Thus, we expect the next several months of economic activity to reflect the monetary and fiscal policies that are currently in place.


Weekly Market Commentary

December 5th – December 9th

Very little economic information was released this week.  Two measure of the service economy were released on Monday, both indicated continued improvement during the month of November.  October Factory Orders suggested strong activity for the month after a slow September reading.  Finally, Consumer Sentiment continued the post-election bounce, rising by more than 4 points.

In equity markets, investors continued to pile into the stock market based on expectations for a business-friendly environment in the years to come.  Expectations for lower personal and business taxes, a reduction in regulatory restrictions and an infrastructure stimulus package all combined to drive optimism and equity markets to all-time highs.  The S&P 500 gained 3.10%, positing the best week since the week of the election.

Interest rates held steady during the early trading days, but climbed higher over the final two.  Ten-year Treasury yields closed the week at 2.46%.  The last time the yield was this high was in June of 2015.

The post-election rally remains intact as investors continue to buy up stocks based on expectations of better times ahead.  However, there may be another driver to this uptick in momentum.  Due to election uncertainty, many fund managers were maintaining significant cash positions in anticipation of post-election volatility.  As the markets have climbed steadily higher, it would not stand to reason that many managers are putting the money back to work before year-end.

At the current market earnings multiples, investors are pricing in a lot of good news in the coming months.  We will continue to be mindful of this condition as we watch policy unfold and ongoing releases of economic data in the weeks to come.


Weekly Market Commentary

November 28th – December 2nd

The first week of the month featured several important economic releases, not the least of which was the employment report which capped off the week.  Throughout the week much of the data was improved including regional manufacturing strength, a sharp improvement in consumer confidence, a strong consumption-driven positive revision to Q3 GDP and improving income levels.  Friday’s employment capped off the week with a solid gain of 178k new jobs created, which was slightly higher than the consensus forecast.  The unemployment rate declined from 4.9% to 4.6%, which was surprising.  However, the decline was driven behind another drop in the labor force participation rate rather than strong job growth.

Given the relatively strong data, which has been improving during the month of November and the post-election strength of the equity markets, it is all but certain the Federal Reserve will increase interest rates at the December meeting.  As always, the outlook for future Fed activity will be closely watched by investors.  The administration shift will most certainly result in policy changes that are designed to fulfill the President Elect’s promises of stronger economic growth.  In such an environment, Fed officials may decide to embark on more pro-active fiscal policy in order to avoid the potential for building inflationary pressures.  Interest rates have already risen dramatically since the election.  Perhaps too quickly in our estimation, as we would need to see more fundamental improvement in order to justify the sudden shift in yields.

After running the S&P 500 up to just over 2,213 last week equity investors hit the pause button.  The broad index moderately lower throughout the week, closing at 2,191.


Weekly Market Commentary

November 21st – November 23rd

The holiday shortened trading week featured two key data points.  The Existing Home Sales report for October followed up last week’s strong report on New Home Sales by posting a solid 2% jump in activity.  It will be interesting to watch reports for November and December as the recent rise in 10-year yields as pushed 30-year mortgage rates above 4% for the first time this year.  The Durable Goods report for October also beat analyst forecasts handily, showing strength across several segments.

On the 22nd, President-Elect Donald Trump released his policy plans for his first 100 days is office which included 6 broad items including; immigration, trade policy, infrastructure spending, defense policy, lifting regulatory restrictions on energy production and bans on lobbying by government employees.

Since the election, equity markets have reacted in a strongly favorable manner, and through Wednesday, this week was no different.  The S&P 500 started the week with a gain of roughly 16 points and followed with small gains on the subsequent trading days heading into the Thanksgiving holiday.

10-year Treasury yields hovered around the week-opening level of 2.34%, closing slightly higher on Wednesday at 2.36%.  Federal Reserve Futures contracts are now pricing in a 100% chance of a Fed rate hike in December.

Next week the economic calendar picks up, and will include the last employment report before the Federal Reserve meeting.  Given the recent strengthening of data and the post-election market rally, we continue to believe the Federal Reserve will raise rates in December.  At this point, we are more interest in the Fed’s 2017 outlook, which was revised lower at the last meeting.  Any significant change in sentiment will likely have meaningful impacts on both interest rates and equity markets.

Wishing a safe and Happy Thanksgiving to All!

Weekly Market Commentary

November 14th – November 18th

On the economic front, data releases were broadly positive throughout the week.  On the consumer front retail sales activity in October came in ahead of expectations while September’s initial reading had a substantial positive revision.  Industrial Production was flat in October, but the manufacturing component expanded for the second consecutive month.  Regional manufacturing reports improved for the month of October while inventory growth was slower than forecast.  This data suggest the recent uptick in manufacturing activity could be with us through the end of the year.  The strongest report of all was the Housing Starts data which surged by 25.5% in October, the strongest monthly gain since 1982.

After last week’s strong post-election rally, the S&P 500 index held the ground gained last week, and continued to climb on a few of the trading days.  By the end of the week, the broad market index improved by 22 points or just over 1%.

Long-term bond yields rose after the election results in reaction to expectations for greater infrastructure spending and tax relief, adding to both deficits and inflation expectations.  10-year U.S. Treasury yields shot up to 2.22% at the close of last week, and continued to slowly climb throughout the week despite an inflation report that showed no signs of mounting inflation.   Rates ticked even higher Friday.  At the close, the long bond stood at 2.34%.

Next week’s economic calendar features more data on Manufacturing, Housing and the service sector of the economy.  In the short-term trading activity will likely continue to focus on the policy priorities the new administration will pursue that may impact the course of growth in the domestic economy.  Thus far we have heard only about the “pro-growth” initiatives.

Prior to the election, analysts were concerned about the potential adverse economic impacts of a Donald Trump presidency, particularly in terms of the then candidates promise to renegotiate trade deals and references to trade tariffs.  Thus far, we have heard little about these thorny and impactful items.  When they eventually surface, investor sentiment may cool in the short-run.   

Weekly Market Commentary

October 7th – November 10th

All eyes were focused on Tuesday’s election as investors prepped for what was shaping up to be a very tight race.  As polls tightened, investors sold off equity positions in an environment of heightened uncertainty.  Conventional wisdom was that markets would prefer to see a Hillary Clinton victory; hence the tightening polls caused concern among equity investors.

As the actual election results rolled in throughout the night, the race proved even tighter than most polls projected.  When the path to a Donald Trump victory became clearer and clearer, the reaction in the after-hours trading was panic.  At one point, the Dow Jones Futures were down almost 900 points.  Though the immediate reaction was swift, markets improved by the open, but still pointed to downward pressure.

Equity markets were down at the open briefly then traded between gains and losses in the early going.  By mid-day markets caught a bid and rose steadily through the afternoon trade.  The positive momentum continued into Thursday with a clear rotation away from the utilities and telecom sectors with Financial, Materials and Industrial names garnering the most amount of investor interest.  The DJIA closed Thursday at 18,807.88, an all-time high.  The S&P 500 remains slightly below the all-time high level.

10-year Treasuries sold off post-election and closed Thursday with a yield of 2.14%.  This is the highest yield on the long bond since the beginning of this year. 

At this early stage, investors appear hopeful that President Elect Donald Trump will usher in policies designed to break this economic deadlock we have been experiencing over the past few years.  Whether or not will happen remains to be seen as only broad strokes have been provided.  We eagerly anticipate more clarity on policy initiatives so that we can begin to determine whether or not the gridlock will indeed be broken.

Weekly Market Commentary

October 31st – November 4th

The first week of the month is always packed with data releases, ending with the BLS Labor Report.  Throughout the course of the week, the majority of data was indicative of firming conditions across the aggregate economy and October releases concerning manufacturing, new orders and the critical service sector all pointed to modestly stronger activity compared to the prior month.  The Federal Reserve announced they would maintain current rate policy, leaving open the possibility of increasing rates in December.  Friday’s employment data came in slightly softer than expected, but an upward revision in the prior month more than offset the October shortfall.  Wages ticked higher and the unemployment rate moved back down to 4.9% due to a decrease in the labor force.  The data was also skewed due to the impacts of Hurricane Matthew, suggesting the numbers may have been stronger than the headlines suggest.

None of this really mattered for equity investors as tightening in the U.S. Presidential elections continued to weigh on investor enthusiasms.  The S&P 500 turned lower mid-day last Thursday after the FBI announced its intentions to review Hillary Clintons e-mail investigation based on e-mails found on a laptop computer shared by her close assistant Huma Abedin and her estranged husband.  Since the announcement, polls have tightened and equity markets have traded steadily lower each trading day.  At the time of this writing, the broad index was alternating between small gains and losses, but presently up by 3 points.

After closing last week at 1.84%, 10-Year U.S. Treasury yields traded in a narrow range throughout the week.  The yield initially jumped after the employment report, but fell back to 1.79% by mid-morning.

With the election finally upon us, and hopefully coming to a final conclusion (let’s hope we don’t see another Bush vs. Gore 2000 scenario), investors will be able to assess the impact of the results, and take positions based on expected policy impacts and areas that may benefit or be adversely impacted by whichever parties controls not only the White House, but also Congress.  In the absence of that certainty, the safer trade has been to stay on the sidelines.

Weekly Market Commentary

October 24th – October 28th

This week featured several economic data points across the economy including; The Chicago Federal Reserve Report, Manufacturing, Durable Goods Orders, Housing and the first report on third quarter GDP.  The Chicago Federal Reserve report showed strengthening activity during the month of September, moving closer to average growth activity in the economy.  Manufacturing activity jumped in September, showing dramatic improvement from the prior month.  Durable Goods Orders from the month of September dropped on weak military and computer orders.  New Home Sales jumped during the month of September as first time homebuyer purchases increased during the month.  Finally, the first estimate of third quarter GDP came in significantly stronger than expected, registering an annualized growth rate of 2.9%, the stronger quarterly reading since the middle of 2014.  The growth was driven by surge in export activity driven by business restocking after drawdown in inventories during the spring and summer.  Business spending also recorded strong gains, despite monthly data suggesting businesses remained cautious in the capital spending activities.

After starting the week with a nice gain, equity markets traded modestly lower for three straight days during the middle of the week.  Caution related to domestic and global economics continue to dampen enthusiasm for purchase of risk-based assets such as stocks.  Additionally, the release of earnings reports with some mixed results, though generally more positive, have been unable to shore up demand for stocks.  The third quarter GDP report released Friday delivered surprisingly strong results with an annualized growth rate of 2.9%.  Areas of strength included exports and business spending on structures.  Equity markets initially posted solid gains through mid-day.  However markets turned south in the afternoon after the FBI announced it was reopening its’ investigation into the Hillary Clinton’s e-mails based on the  appearance of additional e-mails that were found yesterday and deemed “pertinent” to an earlier case of Clinton’s use of private emails.  The gains were lost for the day as the S&P 500 closed down 6.6 points, leading to a loss for the week of 15 points or 0.70%.

Last week the 10-Year Treasury Bond closed with a yield of 1.76%.  As positive data releases were released, rates climbed modestly into the final trading day.  The third quarter GDP report most certainly increased the likelihood of a Federal Reserve rate hike in December, pushing yields higher across the curve.  By the close of trading, the long bond yielded 1.85%, the highest level since last May.

Markets have been somewhat directionless for the past several weeks.  Economic uncertainties combined with political uncertainty in the form of the U.S. Presidential election have investors staying pretty close to home.  With the election 11 days away, one of the major uncertainties will be behind us, and investors can interpret the results and weigh the potential impacts accordingly.  Today's market action clearly illustrated the potential short-term impact of the election results.


Weekly  Market Commentary

October 17th – October 21st

Data releases throughout the week showed little signs of improvement in the manufacturing sector while housing posted some respectable September numbers.  Two regional manufacturing surveys took divergent paths with the Philadelphia Survey showing an uptick in activity during the month of October while the Empire State Survey showed contraction.  The September Industrial Production report continued to point to flat activity in U.S. factories during the month.  Housing struck a more positive tone with a healthy bounce in existing home sales while Housing Starts and Building Permits appeared relatively solid despite a headline number that disappointed.

After closing at 2,133 at the end of last week, the S&P 500 changed very little over the course of the week, moving between small gains and losses each of the 5 trading days.  By the close, the broad market index closed at 2,141; representing a 0.38% gain for the trading week.

Last week the 10-Year Treasury Bond closed with a yield of 1.79%, and much like equity markets moved with little volatility throughout the week.  By the close of the week, the long bond yield dipped slightly to 1.74%.

The Volatility Index or (VIX) moved steadily lower throughout the week to close at 13.34 after beginning the week at 16.12.  Low levels of the VIX suggest investors are perhaps sitting on the sidelines in an environment of a slow news cycle and/ or in anticipation of upcoming U.S. elections.

Next week the economic calendar heats up with data releases across multiple components of the economy, including:  Manufacturing, Housing, Services, Durable Goods Orders and finally, the first estimate of Q3 GDP.


Weekly Market Commentary

October 10th – October 14th


With very little in the way of domestic economic data being released throughout the week, investors focused their attention of the release of the September FOMC minutes.  The minutes confirmed the general sense that some hawkish members of the Fed are getting tired of waiting to lift rates, citing concerns over potential inflation.  The more dovish members remained hesitant to increase rates and preferred to wait for further evidence that the economy was growth at a sustainable pace that is consistent with their objectives of price stability and economic expansion.

News from overseas rattled investors Thursday when Chinese trade data revealed a 10% decline in export activity relative to the same time period 12 months ago.  Imports were also soft, raising concerns that the Chinese economy may not be as stable as many had come to believe.

Finally, Friday’s retail sales report bounced sharply after posting weak results in the first two months of the quarter.  This will likely give a put a pop in Q3 GDP, which has also been well below the average growth rate during the first two quarters of the year.  Should the improvement continue, it may also give the Federal Reserve more rationale to consider raising short term interest rates at their next meeting in December.

The S&P 500 index began the week with a modest gain, then posted a solid down day on Tuesday.  The trade was muted on Wednesday and Thursday, and then the retail sales data gave the bulls a little lift, providing a catalyst for buyers.  The market pushed sharply higher through mid-day, but could not hold the gains at the close.  For the day, the S&P was little changed and posted a weekly decline of  21 points or 0.97%.

After beginning the month at 1.61%, 10-Year U.S. Treasury yields have climbed rather steadily throughout the first two weeks of September.  With investors increasingly anticipation a move by the Fed in December, rates have pushed modestly higher, closing this week at 1.79%.  This is the highest close for the 10-year since the beginning of June.

Finally, election turmoil continues to escalate, though at this point, it doesn’t appear as though investors are reacting to the barrage of negative press.  Next week’s economic calendar remains relatively lite, giving center stage to the drama unfolding in this Presidential election cycle.  Historically, markets tend to perform better in the short-term when the incumbent party maintains control of the White House.  However, market reactions to elections tend to be transitory in nature, with the longer-term impacts being dictated by the implementation of policy.



Please Note:  The next update will take place on 10/14/2016.


Weekly Market Commentary

September 26th – September 30th


Economic data released throughout the week continued to be mixed, pointing to an overall steady, but slow pace of activity.  On the positive side were; regional activity out of the Dallas and Chicago regions and consumer confidence.  On the negative side only data from the Richmond Fed was clearly weak.  However, the remainder of the data was flat.  These items include housing, Durable Goods Orders and personal income growth.

Equity markets gyrated between losses and gains throughout the week.  The S&P 500 started out on a sour note, but moved higher by mid-week.  Thursday’s trade was dominated by news out of Europe concerning the health of German banking giant Deutche Bank.  Reports emerged that hedge funds were reducing their exposure to the bank due to concerns over sufficient liquidity.  Faced with a challenging rate environment and remaining liabilities from the 2008-2009 crisis, Deutche Bank has been slow to restructure.  This has raised concerns among investors, driving the bank’s share price down sharply.  Concerns about a large financial institution brought back memories of the Great Recession, which was in large part driven by a “freeze” in global credit markets.  However, markets recovered Friday, pushing the S&P 500 up by a small margin (roughly 4 points) for the week.

10-Year Treasury yields began the week with a yield of 1.61%, and ended at the same level.  Rates dropped by .05% at the outset of the week, then worked their way back up on Friday.


Weekly Market Commentary

September 19th – September 23rd

The first two trading days were very similar in that they started with gains, which by the end of the day evaporated.  With the Federal Reserve announcement on Wednesday, investors did not stray too far, instead they waited to hear the policy decision and perhaps more importantly, what the outlook was for future tightening.  Before the Fed announcement, the Bank of Japan also released the results of their policy meeting.  The BOJ took a slightly different approach to policy easing by suggesting they will buy bonds to maintain a 10-year yield around zero percent while increasing the monetary base with the aim of pushing inflation above its long-term target of 2%.

The same day, the U.S Federal Reserve decided not to change the Federal Funds Rate while lowering the outlook for economic growth in 2016 from 2.0% to 1.8%.  While the Fed suggested the decision did not reflect a lack of confidence in the economy, they did want to err on the side of caution.  On the heels of the announcement, the S&P 500 posted strong rally, with a health follow through on Thursday.  The index gave some back on Friday, led by a decline in the energy sector.  However, for the week, the S&P 500 gained 1.2%.  Interest rates declined after the Fed announcement.  10-year Treasury yields declined by .09% to close the week at 1.61%.

After the Fed’s announcement, economic data through the remainder of the week confirmed a softening trend into the end of the summer.  The Chicago Fed National Activity Index corroborated several other data points released earlier in the month suggesting that August was a soft month for the economy.  The Leading Economic Indicators report did the same, although the August LEI came on the heels of a strong July report.  The early read on September manufacturing was also soft, albeit positive.

The economic calendar picks up next week with more data on manufacturing, consumption, housing and the final read on Q2 GDP.  As we get closer to the election, investors will most certainly be watching the first Presidential Debate scheduled for Monday evening.

Weekly Market Commentary

September 12th – September 16th

After closing last week at 2,128, the S&P 500 traded between gains and losses throughout the week.  In the absence of any significant economic data, investors continued to shift money in and out of markets on what little data was released, primarily based on their interpretation of how it may impact the Federal Reserve’s rate decision next week.  For the week, the S&P closed with a gain of 11 points or roughly 0.52%.

10-year U.S. Treasury yields remained steady throughout the week, with a slight upward bias.  After closing last week at 1.67%, the long bond closed this week at 1.70%.  This was slightly lower than the intra-week high of 1.73%.

Next week little data will be released in advance of the Fed meeting announcement Wednesday afternoon.  All else being equal, right or wrong, investors will be hyper-focused on the Fed decision and any clues in the formal statement concerning future policy actions.

Weekly Market Commentary

September 6th – September 9th

In the absence of any significant economic data releases this week, although the weak August Non-Manufacturing Activity Index was a little surprising, there wasn’t too much for investors to digest over the course of the week.  This is not unusual as the week following the BLS labor report generally is “data-lite”.

The holiday-shortened week started off on a positive note with stocks posted solid gains on Tuesday.  Wednesday and Thursday saw modestly negative days, but the selling picked up on Friday morning after a couple of Federal Reserve Governor speeches which left investors fearful of a more pro-active stance from the Fed in coming meeting, perhaps including the meeting this month.  In reviewing the commentary, we did not feel as though it was particularly hawking, rather more a mixed message, coming from two Governors Friday morning.  Regardless, investors sold equities into the closing day of trading.  At the time of this 2:00 writing, the S&P 500 index was off by 40 points, leading to a weekly decline of approximately 1.7%.

10-year U.S. Treasury prices declined on Friday, pushing the yield on the long-bond up to 1.67%, the highest level since mid-June.  Much like the equity markets, bonds have traded in a very narrow range over the summer months as tepid economic data, uncertainty over Fed Policy and perhaps uncertainties associated with the U.S. elections have kept investor close to home.

Next week the economic data will pick up on Thursday with several important data releases.  Two more Federal Reserve Governors will give speeches next Monday, which we’re sure will be highly anticipated.  Then the Fed meeting announcement will be delivered on the following week.


Weekly Market Commentary

August 26th – September 2nd

The BLS employment report is always released on the first Friday of the month, garnering a large amount of investor interest.  This month is no exception, particularly in the aftermath of the annual economic conference in Jackson Hole.  However, the week is also filled with a variety of meaningful reports across several economic sectors.  On the manufacturing front, data remained mixed, but still indicative of continued growth in most reports, albeit at a less than impressive pace.  Personal income and spending continued to show signs of improvement as consumers are making more and still spending at a healthy clip.  Construction and housing activity also remained consistent with recent months’ trends.  Friday’s employment report suggested the economy created 151,000 new jobs during the month of August.  This was 24,000 lower than estimates and almost 100,000 off the torrid pace set in June and July.  The average workweek declined by one-tenth, while average hourly earnings increased by the same.  All things considered this was a reasonable employment report that likely assuaged some concerns that the Federal Reserve will be more pro-active in their goal of normalizing interest rates.

Equity markets started with week on a positive note Monday, as the S&P 500 posted solid gains, after last week’s modest slide.  The enthusiasm was somewhat shorted lived as investors took a more cautious approach throughout the mid-week pending the release of Friday’s employment data.  Ever since Fed Chair Janet Yellen’s Jackson Hole speech, investors have become jitterier concerning the possibility of a rate hike.  Friday’s “Goldilocks” employment report (not too hot, not too cold), put some of those concerns at ease and investors bid up risk-based assets, driving the stock market higher.  As of this mid-day writing, the S&P was up by 8.5 points on the day, leading to a weekly advance on the broad index of 0.46%.

After beginning the week at 1.64%, 10-Year U.S. Treasury yields moved modestly lower during the trading week then ticked slightly higher Friday.  At this mid-day writing the long bond traded with a yield of 1.61%.


Weekly Market Commentary

August 19th – August 26th

A good amount of data hit the market over the course of the week.  In the area of manufacturing, the Chicago Fed Index improved more than anticipated while the PMI Manufacturing index fell short of analyst forecasts but still remained positive.  The Durable Goods report on Thursday continued to show signs of strengthening, a good indicator for future production activity.  Finally, Friday’s second estimate of GDP for the second quarter dipped slightly from 1.2% to 1.1%.  On a positive note, inventory reduction was a large detractor from overall growth, which generally suggests stronger activity is on the horizon as inventories are rebuilt.

On Friday, Fed Chairperson Yellen delivered her much anticipated speech in Jackson Hole.  After reviewing the content, Chairperson Yellen expressed optimism over the prospects for economic growth, particularly given the strength in employment data and generally stronger activity over the past few months, and suggested the case for increasing the Fed Funds rate strengthened in recent months.  However, she did suggest that any policy changes would continue to be gradual and that policymakers may need to consider a prolonged period of utilizing accommodative policy measure to ensure economic and inflation goals are realized.

Equity markets traded with a downward bias throughout the course of the week in anticipation of the Yellen speech.  While markets were initially up during the early trade, erasing the decline in the prior trading days the Chairperson’s remarks were ultimately viewed as more hawkish.  As such, equity markets gave up the early gains and traded with modest losses.  For the week, the S&P 500 index decline by just over 14 points or 0.68%.

10-Year Treasury yields began the week with a yield of 1.54%, and traded without direction for most of the week.  Rates bounced modestly post the Yellen address, rising to close the week at 1.62%.

Please Note:  the weekly commentary will not be updated on August 19th, but will resume on August 26th.

Weekly Market Commentary

August 8th – August 12th

The week after the BLS employment data release is generally slow with respect to data releases.  This week was no exception.  The one piece of data that we were anticipating was the retail sales report.  Consumer spending had been more subdued than anticipated after gas prices began to fall a couple of years ago.  In May we saw a strong shift towards increased consumption, which followed through into June.  We were hoping to see continued strength on the part of consumers in July, but were disappointed with a weak reading on the retail sales report which was released on Friday.

Equity markets seemed to be taking an Olympic break as markets were flat over the first two trading days followed by a modest decline on Wednesday.  Thursday however witnessed strong equity purchase activity, more than erasing the prior day’s decline and pushing the three major U.S. equity indices (S&P 500, NASDAQ & DJIA) to all-time highs.  The last time this happened was in 1999.  However, the soft retail sales data put a damper on the enthusiasm.  Equities gave back a little on Friday, but still finished slightly higher for the week.

After beginning the week at 1.58%, 10-Year U.S. Treasury yields moved only slightly lower through Thursday, but again, the soft retail data spurred an interest in bonds causing yields to fall on Friday.  At the close the long bond finished with a yield of 1.51%.

Investors will have substantially more data to digest next week with several key readings concerning Manufacturing, Housing and Inflation being released throughout the course of the week.

Weekly Market Commentary

August 1st – August 5th

Over the past several trading days equity markets traded within a tight range with a generally lower tilt as DJIA closed down 8 of the 9 last trading days heading into the Friday employment report.  This was despite the fact that most of the data released early this week suggested the economy caught a lift from improving manufacturing activity and relatively strong readings on the service sector.

However, the strong BLS labor report on Friday put an emphatic end on the dour sentiment as investment dollars flowed into the stock market.  For the day, the DJIA gained 191 points, pushing the index higher by 1.04%.  Meanwhile the S&P 500 and Nasdaq indices rose to all-time highs.  European markets shared in the enthusiasm, which began the prior day after the Bank of England surprised investors with an aggressive policy easing hoping to offset the potential negative impact of the Brexit vote.

Bonds sold off on the day, pushing yields higher across the curve.  10-year Treasury yields climbed from 1.46% to close the week at 1.59%.

Weekly Market Commentary

July 25th – July 29th

On the economic front housing data continued to provide optimism for sustainable growth as June New Home Sales climbed more than analysts forecast.  Regional manufacturing surveys for the month of July also were decidedly positive.  On the negative side Durable Goods Orders for the month of June were much softer than anticipated while the first read on second quarter GDP was well below forecast, coming in at 1.2%.  First quarter final GDP was also revised down to 0.8%.  These numbers suggest a very weak first 6 months of the year.  In aggregate June data was much stronger than earlier months across several metric and early July reports seem to suggest continued momentum.

Equity markets hovered around the week-opening levels on each trading day.  The S&P 500 index closed the week at 2,173, less than 2 points below the week-opening level.

Long-term interest rates declined over the week as the FOMC announcement on Wednesday kept interest rates unchanged.  The Fed did keep an October hike on the table, but most investors believe the Fed will keep delaying action due to below-trend domestic growth and uncertainties overseas.  The 10-Year U.S. Treasury yield closed the week with a yield of 1.46%.

As always the first week of the month is filled with multiple data points, including the BLS labor report at the end of the week.  After last month’s spike in employment investors will be keen to see if the jump was a statistical anomaly, or if July data supports an improving employment situation.  Along with the headline number, investors will be watching hourly earnings to see if wage growth shows signs of improvement.

Weekly Market Commentary

July 18th – July 22nd

While data releases were lite this week the few that were released suggested continued improvement in U.S. economic activity during the month of June.  At the end of last week retails sales data posted a sharp increase at 0.6%, well above analyst estimates of a 0.1% increase.  National manufacturing activity also rebounded while housing data this week continue to point to steady activity in the housing sector.

Market continued to rise throughout the first three trading days, pushing the DJIA to a 9-day winning streak and a new all-time high of 18, 594.  With little news from overseas and general positive earnings reports for Wall Street, investors continued to shift money into U.S. Equities.  Thursday’s trade broke the streak with the DJIA posting a loss of 78 points.  At the time of this writing on Friday afternoon, the index was up a modest 20 points.

Interest rates moved in a very tight trading range with the 10-year U.S. Treasury opening the week at 1.56% and current trading with a yield of 1.55%.

Next week’s economic calendar in slightly busier with the first estimate of 2nd quarter GDP, additional data on manufacturing and housing and Durable Goods Orders.  The Federal Reserve will also meet next week, with their policy announcement on Wednesday afternoon.

Weekly Market Commentary

July 5th – July 8th

Please note, the next market update will take place on July 22nd.

While the week may have been short on trading days, it was not short on information.  On the economic front Wednesday’s release of the ISM Non-Manufacturing data provided a jolt of optimism for economic prospects in the U.S. as the index jumped significantly higher for the month of June.  That information was followed up by the ADP jobs report that came in stronger than expected to the tune of 172,000 private sector jobs created.  As strong as that number was, the official BLS report surprised economists by registering 287,000 new jobs, well ahead of the expectations for 180,000.  This bounce from the anemic May number of 7,000 assuaged some concerns over sputtering employment growth and the implications on aggregate economic growth moving forward.  Finally, the minutes from the last Federal Reserve meeting were released on Wednesday, revealing that the Board was almost unanimous is maintaining rates amid the heightened economic and geopolitical uncertainties.

U.S. equity markets moved modestly lower over the first three trading days.  But, the release of the June employment data sparked an equity rally, pushing the S&P 500 up by 32 points to close at 2,129.90, just shy of the all-time high of 2,130.82 set on May 21, 2015.

Despite the sharp rally, safe havens that have rallied over the last few weeks gave up little ground.  The 10-year Treasury yield closed the week with little change at 1.36%.  Investors, who had been running for gold, also didn’t appear phased by the sudden surge in equities as the yellow metal also gained 6.30 points on the day closing at $1,368.40/ounce.

Next week’s economic calendar is lite with only a few data points of interest being released at the end of the week.

Weekly Market Commentary

June 27th – July 1st

In the eyes of investors, economic data continued to take a back seat to Brexit related news items.  Nonetheless, data releases during the week continued to suggest sluggish growth through May and June.  Regional Fed surveys were mixed as Dallas and Richmond reported contraction, while Chicago showed a strong rebound during the month of June.  Friday’s release of the ISM and PMI surveys, which measure national manufacturing activity, suggested the pace of activity picked up more than expected during the month of June.  While the growth was still modest, the numbers were stronger than economists’ had forecast.

Housing activity remained steady while price appreciation appears to be moderating somewhat.  Finally, the final print on first quarter GDP softened the dour note struck by the first and second readings, by coming in at 1.1% vs. the prior reports of 0.4% and 0.8% respectively.

Equity markets opened with losses on the first trading day as investors continued to move out of risk-based assets following the large Friday selloff.  But opportunistic investors went back into the market on Tuesday, driving equity prices higher.  The enthusiasm continued into Wednesday and Thursday with U.S. markets gaining back much of what was given up last Friday and Monday.  U.S. Equity markets were modestly higher on Friday, closing the week at 2,103.  This is only 10 points or .05% below the close last Thursday.

10-Year U.S. Treasury yields continued to fall on Monday, but then traded with little change for the remainder of the week, closing at 1.46%.  Given the strength in the equity market during the final four trading days, we would generally expect yields on the long bond to move higher.  The fact that Treasuries held their ground during the equity run suggests that many investors remain cautious in the wake of the Brexit vote.  It may also be a function of bond investors simply preferring the U.S. Treasury compared to its global counterparts.

As we mentioned in our summary last week, a host of uncertainties remain related to the British referendum.  These uncertainties are not only UK-based, but include the membership and structure of the EU moving forward.  We would expect periods of headline-based risk to emerge in the months to come.

June 24th


During this long, but shallow recovery we have encountered several periods of sustained volatility caused by geopolitical events rather than actual data, which has pushed markets into a state of panic.  During the summer of 2011 it was the Greek Debt Crisis.  During the summer of 2013 it was the looming U.S. government shut down.  This summer, Thursday’s decision by Britons during a referendum vote to exit the European Economic Union (EU) kicked off the summer of 2016 with a new source of worry.  However, while Thursday’s vote has increased uncertainties, both geopolitical and economic, the real impact on economic and hence market fundamentals are anything but certain.  Much like those prior events, we would expect sentiment, not fundamentals to drive short-term trading activity.  Which suggests a continued period of volatility is more likely.  Yet, in our management of your portfolio we will remain focused on potential real and fundamental impacts as events unfold overseas.

With respect to the management of your portfolio, Plimoth Investment Advisors has always sought to reduce portfolio volatility by purchasing only high quality assets diversified across several asset classes.  During periods of enhanced volatility, this bias generally mitigates aggregate portfolio volatility.   Further, our equity strategy which focuses on high quality dividend paying stocks also tends to exhibit less volatility than the broad-based S&P 500 index. While these are equity investments and are subject to market based risk, our high quality bias tends to outperform in times of distress.  Meanwhile, the benefits of diversification, which can go unappreciated during periods of market strength, show its worth when the clouds get a little darker.  For example, while equities have been under pressure throughout the day, high quality bonds have generally rallied as global investors have sought to reduce risk and seek safer havens.

We will continue our efforts to manage your portfolios in a disciplined manner, adhering to our principles of quality and diversification.  We will also continue to monitor proceedings overseas in an effort to understand the nature of the pending changes and the potential impacts on global economic and market activity. We would anticipate some adverse impact on aggregate economic activity, but at this juncture do not believe the events will drive U.S. economy meaningfully lower.  One thing that is very likely to change is the stance of the U.S. Federal Reserve.  We believe it would be very unlikely for the Fed to move the Funds Rate higher amid the heightened uncertainty created by the Brexit.  This will be positive for interest rate sensitive assets like bonds, preferred stocks and utility stocks.

With the vote in, it would be possible for the British government to call for a second referendum, giving voters another chance to weigh in on the issue.  Based on the earlier announcements, specifically the resignation of British Prime Minister Cameron, it would appear this possibility is unlikely.  Thus the “exit” process will likely begin sometime in October after British elections are held and new leadership is in place.  Article 50 of the Treaty on European Union sets forth the procedures for removal over a two-year time period.

However, it is not only the nature of the negotiations between the United Kingdom and the EU that will likely influence short-term sentiment, but also the implications on other EU members that may decide to follow the United Kingdom down the “exit” path.  We will continue to monitor developments in the context of ensuring prudent oversight of your portfolio.

As always, if you have any questions, please reach out to your Investment Officer or Relationship Officer.  We are always happy to speak to you about any concerns you may have.

Weekly Market Commentary

June 10th – June 17th     

Investors focused on two main items throughout the trading week.  The results of the upcoming vote in the United Kingdom concerning exiting the European Union was the primary driver of investor sentiment.  A few weeks ago, polls suggested the U.K. would likely remain within the EU.  However, more recent polls suggest the country is leaning more towards a departure.  The macro-economic uncertainties raised by a potential U.K. exit have driven investors away from risk-based assets and towards the safety of U.S. Treasuries.

The Federal Reserve meeting announcement was the other non-economic news that investors were watching.  As expected, the Fed maintained the current level of interest rates with a balanced statement in terms of their view on the current strength of the U.S. economy.   For now, it appears as though the U.S. Central Bank is willing to sit on the sidelines while global political and economic events unfold.

There were a few pieces of economic data released during the week which generally suggested the domestic economy continued to expand at a moderate pace.  Empire State Manufacturing rebounded more sharply than expected in the June report while April Retail Sales provided the biggest upside surprise.  Business inventories grew at a slower pace than anticipated, suggesting manufacturing may pick up in the months ahead.

Despite the generally more positive data, equity markets fell during the first three trading days.  Thursday’s trade looked as though it would continue the downward trend, but a late day rally pushed equity markets higher by a modest .25%.  Markets traded back and forth on Friday, but ultimately closed with a modest loss.  For the week the S&P 500 lost approximately 25 points or 1.20%.

After opening the week at 1.64%, 10-YearTreasury yields dropped to a low of 1.56% by the close on Thursday.  Yields bounced back on Friday to close at 1.62%.

Next Thursday the U.K. will vote on the referendum on whether or not to remain in the EU.  We expect a continuance of this back and forth trade heading into the vote with results from voter polls likely influencing trade flows.

Weekly Market Commentary

June 6th – June 10th


The week following the BLS labor report is generally lite on economic data as was the case this week.  The only real news was Fed Chair Yellen’s speech to the World Affairs Council in Philadelphia.  During the speech the Chair recognized the poor May employment data, but maintains the labor market is still making “considerable progress”.  She also suggested that while the Fed believes the overall economy is strengthening, “considerable uncertainties” remain and stressed that monetary policy is not on a “preset course”.

This “dovish” tone pushed markets higher throughout most of the week as the S&P 500 gained 20 points during the first three trading days.  However, markets dipped slightly on Thursday, then gave up the remaining weekly gains on Friday.  At a closing level of 2,096, the S&P 500 lost 0.14% for the week.

10-year Treasury yields continued to move lower.  After starting the week at 1.70%, the long bond traded higher to yield 1.63% at the Friday’s close.  The move down in yield mirrored the global bond market, where yields continued to fall.  The German long bond is now approaching 0%.

The economic data picks up next week with key data across several sectors being released throughout the week.

Weekly Market Commentary

May 30th – June 3rd     

The first week of the month is always full of economic data, ending the much anticipated BLS employment report.  As the Fed seems to have revived the possibility of a June rate, this week’s report was all the more impactful.

Throughout the week, the data continued to support tepid growth across the economy in May.  Personal Income came in as expected while consumption was slightly stronger than expected.  National manufacturing data continued to expand during May, but at a slow pace.  The ADP employment report came in close to expectations with the economy creating 173,000 private sector jobs during the month.  However, the BLS report released Friday morning was far less encouraging as it suggested a far slower employment environment.  38,000 jobs were created during the month, while prior month’s numbers were revised lower.  While the Verizon strike stripped 35,000 of the number, it was still far below expectations of 158,000 total jobs.  Meanwhile, the unemployment rate fell from 5.0% to 4.7% due to a large decline in the workforce of over 600,000.  Wage growth also remained steady at 2.5% year over year.  The report left analysts scratching their heads while trying to interpret the data.  In aggregate the data certainly creates more doubt with respect to the Fed action in June as the economy does not appear to be accelerating in a meaningful way which would warrant another rate hike by the Fed.

Stocks traded modestly higher during the first three trading days, but the employment report shook investor confidence, pushing the market lower on the open.  By the end of the day, the S&P 500 was well off session lows, closing down by only 6.15points.  For the week the broad market index was unchanged.

!0-Year Treasury yields held steady through most of the week after closing last week at 1.85%.  After the employment report, yields quickly tumbled in the morning trade to 1.73%.  By the close, they had fallen further to 1.70%.

Weekly Market Commentary

May 23rd – May 27t


With relatively little data being released over the course of the week and the Memorial Day weekend approaching one would have anticipated a quiet week in markets activity.  Yet, this was not the case.  On the data front both manufacturing and service index releases showed the economy continuing to expand at a slow pace, while New Home Sales surged during the month of April.  The service data was particularly softer than anticipated.

Despite the mixed data equity markets posted strong gains on Tuesday and Wednesday after losing a little ground in Monday’s trade.  Thursday’s Pending Home Sales report was also much stronger than anticipated, reinforcing the strength in the earlier housing report.  While the trading stalled on Thursday, investors headed into the weekend on a positive note, pushing the S&P 500 up to 2,099 at the close of the week.  For the week the S&P 500 gained a solid 2.29%.

After closing the week at 1.85% last week, long-term bond yields traded within a tight range, ending the week exactly where it started.  With yields so low, mortgage rates are once again giving potential buyers an opportunity to lock in historically low borrowing costs.  Given our outlook for range-bound Treasury yields, we anticipate housing to continue providing support for aggregate economic activity.

Weekly Market Commentary

May 16th – May 20th


In aggregate this week’s economic data report continued the trend of generally soft data.  Two regional manufacturing reports indicated activity in April contracted, while two national data points suggested modest improvement in domestic manufacturing activity.  Housing data improved modestly and remains one of the stronger components of the domestic economy.  Finally, Core CPI came in as expected, indicating little build-up of inflationary pressures.

While the data remained tepid, two Federal Reserve governors expressed their views that the June meeting could in fact result in the next move higher in the Federal Funds rate.  These comments were made prior to the release of the last meeting minutes which also suggested June was off the table.  In all instances the term “data dependent” remains key and clearly suggests the decision is fluid.

After the last disappointing employment report most investors believed the Fed was on hold until the Fall.  The announcements rekindled fears that the Fed would push rates higher and traders took notice.  After posting a solid gain on Monday, the S&P 500 fell Tuesday, held ground Wednesday, and then continued to decline on Thursday.  After breaking into negative territory for the week, the market rallied back on Friday, eking out a gain of 0.28% for the week.

Bond yields which had been grinding lower over the past two weeks jumped higher at the prospects of a Fed rate hike.  After opening the week at 1.71%, the 10-Year Treasury closed with a yield of 1.85%.


Weekly Market Commentary

May 9th – May 13th


Investors had very little data to consider over the course of the week.  After opening the week at 2,057, the S&P 500 improved slightly on Monday’s trade, the finished Tuesday with a strong 25 point gain.  The gains were fleeing though as Wednesday’s trade gave back 20 of those points.  Thursday was another flat day, but Friday’s economic releases included the Retail Sales report, which was of particular interest given the recent slowdown in this data series.

The report showed an increase of 1.3% during the month of April, the strongest monthly report in over a year and well above the average forecast of a 0.9% improvement.  The strength was broad-based, suggesting the consumer may indeed have woken up from their collective winter doldrums.

Prior to the report stocks were set to open with a loss, but that loss dissipated as the market approached the opening bell.  Equity markets traded flat for most of the day, then made a strong move lower in the final trading hours.  On the day, the S&P 500 lost 0.85%, leading to a weekly loss of 0.48%.

Once again, the bond market traded with little volatility, but rallied on the final trading day.  The 10-year Treasury yield opened the week at 1.78%, and traded at 1.70% by the close on Friday.

The reason for the late day sell-off was not apparent.  Some speculated that the stronger than expected retail sales data increased the likelihood of Federal Reserve action in June, pushing stocks down and the Dollar higher on the day.

Next week the economic calendar picks up with a host of data releases across multiple components of the economy including;  manufacturing, housing and inflation.


Weekly Market Commentary

May 2nd – May 6th


While the investors were focused on the BLS labor report at the end of the week, a good amount of data was released throughout the week.  First, on the manufacturing front, April data continued to limp along out of the weak first quarter.  With inventories in the supply chain thinning out, we would expect some modest improvements in manufacturing activity heading into the spring.  Fortunately, April service sector data improved greater than analyst’s forecasts.  Construction spending also improved and remains one of the strongest components of the domestic economy.  Motor Vehicle Sales data continued to show U.S. consumer’s appetite, rising above expectations for the month of April.

The stock market made solid gains on the first trading day of the week, and then quickly retreated the following two days on the news of slow manufacturing activity in China in the prior month.  Global growth fears once again gripped the market, pushing investors into safer assets on the day.  Markets held relatively steady on Thursday in advance of the Friday employment report.  The report revealed the economy created 160,000 jobs during the month of April, roughly 40,000 below expectations, while the unemployment rate held at 5%.  Stocks quickly sold off, but then recouped the losses by mid-day, and finished with modest gains by the close.  The weaker than expected employment data reduced the likelihood of a Fed rate hike at the next meeting in June.  A continuation of current rate policy likely brought some investors back into equity markets.  For the week the S&P 500 declined a modest 0.39%.

Once again the level of interest rates traded within a very tight range throughout the week.  By the close, the 10-Year US Treasury yield 1.78%, after opening the week at 1.82%.  Long-term rates remain range bound with both global economic uncertainties, reduced expectations for Federal Reserve rate hikes and global quantitative easing all preventing long-term rates from moving higher.


Weekly Market Commentary

April 25th – April 29th


The Federal Reserve meeting this week was at the top of the economic/market watch list.  In their prepared announcement the Federal Reserve referenced continued improvement in the labor market while household spending has moderated in recent months.  At the same time, business fixed investment and weaker exports, continued to put a damper on aggregate economic activity.  As such, the Federal Reserve decided to maintain the current level of the Federal Funds rate and maintain a relatively “dovish” stance of future rate hikes.

Economic activity released during the week was consistent with the general tepid tone set in the prior months.  First quarter GDP came in at 0.5%, 2 tenths below the anticipated 0.7%.  March Durable Goods orders rebounded modestly to +0.8 yet was below the consensus estimate of 1.6%.  Regional Federal Reserve survey remained in somewhat subdued while New Home Sales improved modestly.  Similarly, the PMI Service report showed slight improvement during the month of April.  All things considered, slow first quarter GDP was weighed down by the front months while March showed some modest improvement.  Early April data suggests similar activity for the first month of the second quarter, but has yet to rebound with any significance.  While we expect business spending to be strained, incremental consumer spending will be needed to push GDP higher in the coming months.

Equity investors took a breather during the week, with the market moving sideways for the first three trading days, only to take a more negative tilt on the final two trading days.  For the week, the S&P 500 lost 26 points or 1.26%.

10-year Treasury yields moved up .04% to 1.93% at the close of Tuesday.  Then fell back down after the Federal Reserve announcement closing the week at 1.84%.  The long-bond has been range bound since the beginning of the year, and appears unable to move back beyond the 2% threshold in the short-term.


Weekly Market Commentary

April 8th – April 15th


Please note, Market Commentary will not be updated on April 22nd. The next update will be on April 29th.



Very little economic data was released during the week.  On the negative side, retail sales continued to be soft through the month of March.  Business inventories also declined, providing some room for manufacturing growth in the coming months.  To that end, the April Empire State Manufacturing report showed signs of life, rebounding from very soft activity over the winter months.  The global growth picture got a little brighter this week with stronger than expected growth number in China and Europe.

This week also marked the beginning of the earnings season.  While Alcoa kicked things of on a sour note, better than expected numbers out of J.P. Morgan drove financial stocks higher, pulling the broad index along for the ride.  With very low expectations heading into the releases, positive earnings surprised could provide more fuel for equity investors in the coming weeks.

The S&P 500 stock index gained a solid 1.76% during the first three trading days of the week, and then traded modestly lower for the remainder of the week.  Still, the index posted a solid gain for the week.  10-Year U.S. Treasury yields continued to trade within a very tight range throughout the week.  By noontime Friday, the long bond yielded 1.74%, only .04% above last week’s close.

OPEC and Non-OPEC oil producers will meet this weekend to discuss potential production limitations.  Crude prices have been rallying lately on the potential reduction in supply.  Should an agreement remain elusive, crude prices have room to fall from current levels.  This could adversely impact stock prices as the two have been highly correlated over the first quarter.  Earning reports to be released over the next few weeks will also be a driving force behind market action.


Weekly Market Commentary

April 4th – April 8th


The week following the employment report generally contains limited data releases and this week was no exception.  Of the data that was released, the service sector of the economy showed a modest level of recovery during the month of March with two surveys indicating expansion in this part of the economy.

Two Fed governors gave formal speeches, while during an interview Boston Fed President Eric Rosengren expressed his belief that markets were beginning to become too complacent concerning Fed Policy expectations.

Overseas Thursday rumors the International Monetary Fund would once again cut 2016 global growth expectations next week sent markets heading south after treading water during the first three trading days.

After starting the week at 2,073, the S&P 500 index traded between losses and gains throughout the week.  By the close on Friday, the index stood at 2,048, 1.21% below the week opening level.

10-Year US Treasury yields fell by .07%, closing the week at 1.72% after touching 1.69% on Thursday.

The economic calendar is relatively lite next week with only a few data releases on Manufacturing and Retail Sales being released at the end of the week.  On April 17th OPEC and non-OPEC oil producers will meet to discuss production levels.  The results from that meeting could have a meaningful impact on crude prices and equity markets in the near-term.


Weekly Market Commentary

March 28th – April 1st


Impactful economic data was released throughout the week across several components of the economy including income, spending, housing, manufacturing and most notably the monthly employment data which was released on Friday.  The data in the early part of the week was generally quite positive with surprisingly strong rebounds in two March manufacturing reports.  Housing data also came in slightly stronger than anticipated while personal income and spending came in just about as anticipated.  Inflation data also hit the tape, which continued to suggest little pricing pressure.

The BLS employment survey continued the string of solid reports with Nonfarm Payrolls increasing by 215,000, 5,000 better than anticipated.  The unemployment rate moved higher, from 4.9% to 5.0%.  This was caused by an increase in the participation rate, which is a positive sign as it indicates potential employees are re-entering the labor force.

Equity markets climbed modestly throughout most of the week as Federal Reserve Governor speeches, particularly the one given by Chairperson Yellen suggested a very “dovish” approach to interest rate policy.  Her discussion centered on global risk factors including the prolonged slump in energy prices and ongoing concerns about growth in China.

Markets originally sold off on the solid jobs report Friday morning, as tumbling oil prices and concerns over Federal Reserve policy once again drove some selling activity.  However, by mid-day, U.S. equity indices had recouped the losses and were trading modestly higher.

Meanwhile, 10-year Treasury yields moved lower throughout the week on the “dovish” Fed talk.  After opening the week at 1.90%, 10-Year Treasury yields traded at 1.80% at mid-day.

Oil’s decline was fueled by news out of Saudi Arabia indicating that the country would not impose production limits if Iran and Iraq did not join in the effort to move prices higher.  There is an unscheduled meeting this month between OPEC and non-OPEC oil producing nations to discuss possible actions.  The news of this meeting drove crude prices higher over the past two weeks, but the gains have not held amid ongoing posturing by the Saudi’s.  We continue to believe the high correlation between oil prices and stock prices will be ongoing pattern until oil reaches a price level that will sustain governments that rely on oil revenue to fund government activities and debt servicing.


Weekly Market Commentary

March 21st – March 25th


After five straight weeks of equity market gains which pushed the S&P 500 above year-opening levels, stocks were due for a respite.  The holiday-shortened and data lite trading week provided investors the perfect opportunity to assess valuation and the prospects for future growth.  Somewhat surprisingly markets did not react to the horror in Brussels caused by Extremist Islamic Terrorists early Tuesday morning.  The attacks in France caused a modest downtick in markets, but quickly recovered.  Sadly, perhaps investors are become incrementally accustomed to the notion that these cowardly attacks are a part of our global society.

On the data front, housing numbers were mixed as Existing Home Sales fell short of expectations while New Home Sales exceeded.  An early measure of March manufacturing activity pointed to a modest rebound, but still suggests a slow pace of growth.  The same was true of a March service sector report.  February Durable Goods Orders supported the notion that manufacturing continues to face headwinds here in the U.S.

For the week, the S&P 500 lost roughly 14 points, or 0.68%.  Meanwhile, 10-year Treasury yields barely moved, opening the week at 1.89% and closing at 1.90%.


Weekly Market Commentary

March 14th – March 18th


Economic data turned slightly more positive over the course of the week.  Most notable were improvements in regional manufacturing surveys which well outpaced expectations and the manufacturing component of the Industrial Production survey which showed strong improvement.  Additionally, housing data continued to suggest healthy activity in the housing market.  On the negative side, Retail Sales data were disappointing for the month of February and also included downward revisions to prior months.  Surprisingly, lower energy prices have yet to meaningfully impact spending patterns among consumers.

The driving force behind market activity came from two areas.  First, the Federal Reserve decision on Wednesday to maintain the current level of the Federal Funds Rate, while offering more “dovish” comments concerning future rate decisions buoyed investor spirits.  However, the most impactful news came from the Middle East, where OPEC and non-OPEC producers will hold a meeting in the Qatari capital on April 17th.

"This comes as a follow-up to the meeting that was held last month in Doha between Qatar, Saudi Arabia, Russia and Venezuela at which they proposed an accord to freeze oil output at January 2016 levels and called on other producers to do so," the minister, Mohammed Bin Saleh Al-Sada, said in a statement.  The statement said that to date, around 15 OPEC and non-OPEC producers, accounting for about 73 percent of global oil output, are supporting this initiative.

The news sent oil prices rocketing higher, pulling global equity markets along for the ride.  While the market was slow during the first few couple of trading days, indices began moving higher on Wednesday, and continued through the remainder of the week.  For the week the S&P 500 gained 1.35%, leaving the index at 2049.58,  0.27% above the year-end level.

10-Year Treasury yield ended last week at 1.98%.  The yield hit 2.0% intra-day on Wednesday just prior to the Fed announcement.  After the announcement yields fell quickly and held the level to close at 1.87%.  The dovish sentiment convinced investors that monetary policy would indeed remain accommodative for an “extended period of time”.  The short-end of the yield curve followed suit, with 2-Year Treasury yields falling by .13% to close the week at .81%.


Weekly Market Commentary

March 7th – March 11th


The week following the BLS labor report is traditionally slow with respect to economic releases, which was the case this week.  As such, there was little news to move markets outside of the expected action of the European Central Bank.

After closing the week a fraction shy of 2,000, the S&P 500 traded modestly lower during the first three trading days.  The index got an early boost on Thursday after the European Central Bank took further measures to stimulate growth and avoid deflation.  However, the gains quickly gave way to losses during mid-day amid falling energy prices.  By the close Thursday, equity markets remained little changed.  An announcement from the International Energy Agency suggesting that oil prices had already bottomed pushed crude prices and global equities sharply higher.  For the day, the S&P 500 gained 1.64%, leading to a weekly gain of 1.15%.

As risk based assets rose in value, the safe havens declined.  10-year Treasury prices fell during the week, pushing yields higher.  At the close of trading Friday, the 10-year Treasury yield stood at 1.98%, 0.14% higher than the prior weeks close.

Next week the economic calendar picks up with an early report of March manufacturing activity in addition to housing and retail sales reports.  There is no doubt the pace of the economy was slow heading into the first quarter of 2016 and continued to sputter in the opening months.  If the recent annual patterns continue, we should expect to see some improvement in data over the next several reporting weeks.

Weekly Market Commentary

February 29th – March 4th


Economic data was released throughout the week across multiple sectors of the economy.  In aggregate, while still tepid, the data suggests the U.S. Economy remains in a modest expansion mode.  After several weak months in the manufacturing sectors, two key releases indicated a modest improvement in February activity.  Housing data was a little mixed with Pending Home Sales softer than expected, but Construction Spending improving better than expected.  Finally, the ISM Non-Manufacturing Index came in slightly above expectations, suggesting the bulk of the economy continues to expand.  Finally, employment data released by both ADP and the Bureau of Labor Statistics both pointed to a sharp rebound in job creation during the month of February, further lending to confidence that the economy remains on track to continue a pace of moderate growth.

Equity markets got off on the wrong foot Monday after posted modest gains during the prior week.  However, Monday’s loss was quickly erased with strong gains on Tuesday.  Heading into the Friday employment report, markets continued to move modestly higher Wednesday and Thursday.  After the strong employment data released Friday morning equity markets traded between gains and losses during most of the day.  On one hand, the data relieved investors with recession fears.  On the other hand, it also raised concerns over how aggressive the Federal Reserve may be in raising interest rates.  By the close of the day, the optimist’s one out as the S&P 500 gained .33% on the day.  For the week, the broad market index registered a solid gain of 2.67%.

After closing last week with a yield of 1.76%, 10-Year Treasury prices continued to gradually fall as risk-based assets (stocks) climbed throughout the week.  By the close of trading on Friday the yield stood at 1.87%, the highest level in about a month, but still well below the year-opening level of 2.26%.

After the rush of data this week, next week’s economic calendar is very lite, thus leaving overseas data the likely source of trading direction over the course of the week.  Discussions over the direction of Fed policy may also be impactful on markets as the strong employment report today will certainly make the March Federal Reserve meeting at least somewhat more interesting.

Weekly Market Commentary

February 22nd – February 26th

After posting the strongest weekly gains of the new-year last week, the S&P 500 stood at 1,918, still 6.2% below the year-ending level of 2,044.

Throughout the week investors were set to digest several pieces of economic data across the housing, manufacturing and service sectors.  In addition, several Federal Reserve governors were set to give speeches throughout the week.  With respect to manufacturing several regional surveys continued to show signs of struggle amid a continued export headwinds and concerns over softer demand.  However, Durable Goods Orders were better than expected which confirmed an uptick in the Industrial Production number reported last month.  In the housing sector, Existing Homes Sales posted modest gains, retaining the momentum from the strong December report.  New Home Sales were a little softer, but still indicative of a healthy housing market that is being buttressed by low interest rates and stable employment.

Personal Income and Expenditures both grew at a faster than expected pace, signaling consumer spending should remain steady.  The biggest surprise came from the February Flash Services report which showed a significant decline in activity.  The service sector accounts for roughly 70% of U.S. economic activity.  While one month of data does not justify cause for alarm, it does warrant monitoring in an environment of heightened economic growth concerns and Federal Reserve Policy.  On balance Federal Reserve Governors struck a move “dovish” tone in their respective comments.  While none suggested a rate hike was off the table for the upcoming March meeting, the idea of 4 rate hikes in 2016 seems to be sidelined.

The S&P 500 opened the week with a roughly 1% gain, which promptly got undone the following day.   Markets gradually gained in the subsequent trading sessions.  At weeks end, the S&P stood at 1948, resulting in a gain of 1.51%.  Volatility slowed throughout the week, producing a week of unfamiliar calm in the markets.  Bond yields fell through the first 4 trading days, with the Ten-year U.S. Treasury falling below 1.70%.  Treasuries sold off on Friday and the yield closed at 1.76%, or .01% lower than the week-opening level.

This weekend Finance ministers and central bank leaders from the world’s 20 leading economies are meeting this weekend in Shanghai to discuss the current state of the global economy.  Among the many topics discussed chief among them will likely be:  the impacts of heightened market volatility on the global economy, global rate policy and currency valuations and the potential need for additional fiscal stimulus from wealthier nations.Next week’s economic calendar will provide plenty of trading information culminating with Friday’s BLS labor report.

Next week’s economic calendar will provide plenty of trading information culminating with Friday’s BLS labor report.

Weekly Market Commentary

February 15th – February 19th

The holiday-shortened trading weak featured little in the way of economic data.  Of the information that was released, the themes remained consistent.  Manufacturing continues to struggle with export headwinds and reduced capital spending in the domestic energy sector.  On the other had housing activity remains steady and motor vehicle purchases (particularly SUVs and trucks) continue drive industrial production.  The release of the Federal Reserve minutes on Wednesday suggested Fed Governors were in fact concerned about the impact on global market volatility, as the tone of the minutes appeared to be more “dovish” in nature.  Inflation data on Friday suggested an uptick in the core rate of inflation primarily attributable to housing and healthcare costs.

Stocks caught a bid early in the week, picking up on the positive move at the close of last week.  Stocks rallied strongly for the first two trading day, creating the first 3-day positive move in equities for 2016.  Markets softened modestly on Thursday and continued to post modest losses Friday after the inflation data and Fed Governor Mester expressed her belief that the U.S. Economy would “power through” the global market turmoil and return to a moderate path of growth.  Mester, a voting member of the Fed policy committee, said she still backs further gradual rate hikes this year.

Oil prices also rose early in the week on the heels of a potential “production freeze” agreed upon by OPEC and non-OPEC members.  However, the agreement was contingent upon the compliance of Iran and Iraq, both of which have yet to confirm their willingness to comply.  Oil prices fell later in the week, hovering back below $30 per barrel.

At the time of this writing (mid-day Friday) the S&P 500 was poised to post a solid gain for the week, despite the softness in the final two trading days.

Weekly Market Commentary

February 8th – February 12th

With very little data being released during the week, all eyes were focused on Chairperson Yellen’s congressional testimony on Thursday and Friday.  Despite the Fed’s stated desire to normalize interest rate policy, the global market turmoil has reduced expectations for the two or four rate hikes that at the beginning of the year appeared inevitable.

To be fair, the Fed has always maintained that their actions remain data dependent, despite their desire to normalize.  Since the beginning of the year, data has suggested the pace of growth has slowed primarily due to continued pressure on exports, reduced capital spending and consumer spending that has not lived up to expectations given the reduction in energy costs.  On a more positive note, the employment and housing data continues to support those who believe the U.S. economy remains on a path of expansion.

However, Investors didn’t wait for the Federal Reserve to continue putting pressure on equity indices.  Markets opened the week with a sharp sell-off, only to level off on the following trading day.  Markets initially rallied on Wednesday ahead of Chairperson Yellen’s testimony, but the congressional address only exacerbated anxiety as Yellen unsuccessfully attempted to thread a needle.  By the close of the testimony, the generally consensus was that Chairperson Yellen was not as dovish as people expected, leaving the March rate hike on the table while recognizing the volatility and deterioration in global markets.  Markets finished flat on Wednesday, then continued to sell off on Thursday.   From our perspective, we have not believed the Fed would hike in March, and we continue to believe that to be the case.  While the “service heavy” U.S. economy will likely continue to grow in a 2% range, inflation and sustainable wage growth are still lacking.  Furthermore, continued U.S. rate hikes will only strengthen the dollar, adversely impacting export activity and capital expenditures.

Friday started with a lift, then gathered some momentum as European equity shares surged, and Retail Sales data in the U.S. was better than forecast.  Equity markets posted solid gains on the day, but still remained down for the week.  Amid this action, intraday volatility remained very high.

Interest rates were interesting to watch as well.  At one point during the height of the panicky equity trade, 10-year Treasury bonds fell as low as 1.52% as investors flocked to the safety of U.S. Treasuries.  After starting the week at 1.81%, 10-year Treasury yields closed at 1.75%.  It is unusual to see such volatility in Treasury prices which just further demonstrates investor uncertainty.

Weekly Market Commentary

February 1st – February 5th

After reporting a meager 0.7% GDP growth rate in the final quarter of 2015, January data continued to confirm a slow pace of economic growth early into 2016.  The main driver of growth remains in housing and the service sector of the economy, with housing maintain much of the late 2015 momentum while the service sector eased modestly.  Manufacturing continues to show signs of contraction amid lower export activity.

Employment data released throughout the week continued to show signs of improvement amid an environment of market turmoil.  The ADP private sector payroll report registered a gain of 205,000 jobs during the month of January, 15,000 ahead of forecast.  Meanwhile, the BLS report on Friday suggested job growth was solid but not as strong with gains of 151,000 jobs, which was 37,000 below expectations.   The unemployment rate fell to 4.9% despite the .10% uptick in the labor force participation rate.  Hourly earnings also rose 0.5%, which was 0.2% ahead of expectations.

After opening up the week with a solid loss, the S&P 500 traded modestly higher across the next three trading days amid the all too familiar heightened volatility.  Friday’s jobs report pushed equity markets lower.  Despite the generally softer job number, rising wages increased investor concerns that the U.S. Federal Reserve would indeed raise the Federal Funds rate at the next meeting in March.  A more aggressive Fed is just one of several triggers that drive trading in this volatile market (oil prices and Chinese economic growth concerns among them.)

10-year Treasury yields which started the week with a yield of 1.85%.  Yields had been pushed even lower earlier in the week, then regained some ground subsequent to the BLS Employment report and the heightened expectations for Fed action.

After the employment report, it is clear that investors view the data as improving the possibility of a Fed rate hike in March.  While we continue to believe the Fed has the latitude to remain patient in their goal of normalizing interest rates, any positive reports on the employment situation, particularly in the area of wages, will be more likely to push the Fed to act.  Next week Chairperson Yellen will give two speeches which will no doubt be widely watched.

Weekly Market Commentary

January 25th – January 29th

The period of market volatility continued throughout the week.  Amid a backdrop of weak manufacturing data, a 4th quarter GDP report that came in at 0.7% annual rate (below expectations) and mixed earnings results from corporate America, stocks whipsawed back and forth throughout the week.

Amid all economic reports, earnings announcements and rumors concerning potential oil production cuts between OPEC and non-OPEC countries, announcements from central banks ultimately drove the direction of the market for the week.  On Wednesday the U.S. Federal Reserve issued its rate statement, leaving the rate unchanged as expected.  There was one notable item missing from the statement.  The Fed dropped the reference to the belief that the risks facing the economy are “balanced”.  The missing reference implied that the Fed now sees enhanced risk to ongoing economic growth presumably emanating from the global market turmoil that has stunned investors since the beginning of the year.

After 4 days of back and forth trading, equity markets were trading slightly lower through the close on Thursday.  Friday’s big announcement came from the central bank of Japan which shocked markets by cutting their benchmark interest rate below zero in an effort to stimulate their economy.  While the government referenced continued economic improvement, they also expressed concern about the potential adverse impacts of unstable oil prices and weakness in emerging markets which might derail their continuing improvement.

Equity markets rallied early across the globe, then caught a more significant bid in the middle of the trading day in the U.S.  By the close, the S&P 500 gained an impressive 47 points or 2.41%.  After a month of high volatility, the broad index lost 5.09%.

Despite the equity rally U.S. Treasury bonds also gained.  With such a strong move into risk-based assets, one would normally expect the 10-year U.S. Treasury to sell off, resulting in a higher interest rate.  In fact, rates fell .05% on the day, closing the week at 1.93%.  At the beginning of the year, markets were pricing in two Federal Reserve rate hikes, which would ultimately push rates higher.  At this point interest rate speculators have pushed the probability of the next rate hike from March to September.  Given the Federal Reserve comments and the BOJ action, it appears as though rising interest rates in the U.S. will likely be put off for an even longer period of time as global conditions continue to be assessed.

Weekly Market Commentary

January 18th – January 22nd

The volatility of the prior two weeks continued into the third trading week of the year.  Despite a host of earnings announcements from U.S. Company’s investors remained focused on oil prices, as the fortunes of global stocks rose and fell with the wide swings in oil prices.  Tuesday saw a see-saw day with the markets giving up early gains to close flat.  Wednesday market were down sharply on declining oil prices, but did recover to post a more modest lost by the close.  Oil prices rose Thursday and market responded with a modest gain.  Thursday’s gain may have also been enhanced by news from the European Central Bank that more policy accommodation may be in the offing should global market turmoil begin to disrupt the fragile European economy .   Oil prices continued to rise Friday, and equity markets responded with strong gains across the globe.

Economic data for the week was relatively thin.  Manufacturing data released suggested the slowdown in manufacturing peaked in November, while showing slight improvement in December.  The Flash PMI report for January suggested manufacturing activity improved into positive territory based on the strength of domestic demand.  On the housing from Housing Start and Permits weakened in December after posting large increases in November.  Meanwhile, Existing Home Sales registered strong gains, far surpassing consensus estimates.  All things considered, not a bad week on the domestic data front.

At the time of this writing , markets were up strongly on the day.  After opening the week at 1,880, the S&P 500 currently stands at 1,902.   Should markets close at this level, the S&P 500 will have achieved its first positive trading week in 2016.  Despite the increase, we continue to believe that volatility is likely to continue as additional data points and news items are released.  Heightened uncertainties emerging from many areas; economic, commodity, geopolitical and policy-related have all converged, exacerbating market turmoil and thus volatility in capital markets.


Weekly Market Commentary

January 11th  – January 15th


The second week of the trading year looked much like the first as concerns over continued downward pressure on oil prices and uneasiness over the pace of Chinese economic growth continued to provide market bears with enough negative sentiment to propel markets lower.  Markets were relatively quiet on the first two trading days, with a slight upward bias.  Then cratering oil price brought the broad market down sharply on Wednesday.  Market recovered on Thursday with a recovery in oil prices, and approached the week-opening levels.  Then on Friday, a renewed slide in energy prices brought the broad -market sharply lower.  On the day, the S&P 500 lost 2.18%, which was equivalent to the loss for the week.

At this point the volatility has been associated with uncertainty over both Chinese economics and policy and the precipitous decline in energy prices.  Both of these were factors in the August 2015 sell-off.  At that time China was the main concern.  The potential dislocations caused by declining energy prices have emerged as an equal fear, further dampening investment sentiment.  We know that in August Sovereign Wealth funds such as Saudi Arabia had to liquidate stocks in order to cover their budget shortfalls precipitated by lower energy prices.  While the data is not yet available, we suspect more forced liquidation is another component of the most recent slide.

The economic calendar was very lite this week with only a few pieces of data being released in the areas of consumption and manufacturing.  Both releases were Friday, and not positive, perhaps giving further momentum to the down-side.  Corporate earnings began this week, which were somewhat of a mixed bag, but certainly not of the ilk to produce such downside pressure.  Earnings season really begins in earnest next week, and investors will not only be looking at Q4 results, but dissecting forward guidance.

Of course, the “flight to quality” brought 10-year government bond yields down with the 10-year Treasury closing the week at 2.05%.

Given the heightened uncertainty, we continue to expect enhanced volatility for the foreseeable future.


Weekly Market Commentary

January 4th  – January 8th

Not only did we not see a “Santa Claus Rally” at the end of 2015, but we opened 2016 with a big lump of coal in the form of the worst opening year-opening week on record.

Markets traded sharply lower at the outset of the week on soft economic data out of China.  The Chinese Shanghai index dropped 7%, only slowed by circuit breakers that halted trading.  Markets across the globe followed suit, with most falling between two to three percent.  Tuesday was relatively stable, but global markets continued to the slide on Wednesday and Thursday as another day of halted trading in China strained investors already week nerves.

In addition to concerns over the Chinese markets and economy, investors also had to digest more geopolitical turmoil as tensions in the Middle East continued to escalate and North Korea announced the successful detonation of an H-Bomb.  The hawkish U.S. Federal Reserve governor Richard Fisher didn’t help much by announcing the expectations for two rate hikes during 2016 is an underestimation, expressing his belief that four hikes would be the appropriate path.  Given the confluence of new items, the recipe for a large sell-off to shape, leading to large declines with little sign of opportunistic buyers looking to pick up cheap stocks.

In an effort to ease investor panic, Chinese officials removed their circuit breakers that had closed the market on two previous trading days, instead opting for more direct purchase interaction to maintain market stability.  This seemed to be a more successful approach as the Chinese market did stabilize and post a modest gain on the final trading day.  Friday morning’s job report was a real positive surprise, indicating the economy produced 292 thousand jobs in December, well above the estimated 200 thousand.  The unemployment rate remained at 5% and prior month’s job production was revised higher.  All of this with still little sign of strong wage growth.

Initially, U.S. markets rallied on the news as it reduced concerns that U.S. economic weakness into the end of the year was indicative of a prolonged slowdown.  However, it didn’t take long for equity markets to give it all back on concerns the strong jobs number would more likely lead to Fed rate tightening in March.  By mid-day, markets were flat.  They remained that way for most of the afternoon, but then sold off sharply in the final hour of trading.  Investors were likely taking money off the table over the weekend pending further developments out of China.

While next week’s economic calendar contains several important data releases, the news out of China will dictate trading sentiment in the coming weeks.


Weekly Market Commentary

December 21st – December 24th

Despite the holiday shortened trading week, several pieces of data were released across various sectors of the economy, including:  Manufacturing, Housing and Personal Income.  Manufacturing activity continues to suffer from weak exports.  However, new orders showed signs of life, giving hope to stabilization in the manufacturing sector.  New home closing rules led to a decline in existing home sales, but new construction continues to improve.  Sales activity has been crimped by a lack of inventory this year, and it appears as though homebuilders are responding.  Personal income rose by 0.3% in November, ahead of consensus expectations for a 0.2% gain.  Wage growth has been elusive in this recovery, but has been showing gradual improvement in the second half of this year.  Third quarter GDP was revised slightly lower, from 2.1% to 2.0%.  The decline was due to a decline in inventories, which while negative for the third quarter, suggests manufacturing may pick up to replenish inventories moving forward.

After a rough two weeks of trading for equity investors, the Christmas week has brought about some cheer as equities gained on each of the four trading days, leading to a gain of roughly 2.90% for the week.

Bond yields rose as investors liquidated Treasuries, flowing funds into the stock market.  10-Year Treasury yields closed at 2.25%.

With one more holiday-shortened week remaining in the year, the S&P 500 stands very close to the year-opening level of 2,059.


Weekly Market Commentary

December 14th – December 18th

After closing last week with a decline of roughly 3.78%, equity markets rallied during the first three trading days in advance of the Federal Reserve announcement Wednesday afternoon.  After starting the week at 2,012, the S&P 500 closed Wednesday at 2,073.  The Federal Reserve announced the first increase in the Federal Funds rate since 2006.  The well anticipated 25 basis point increase was justified by the strengthening employment market and moderate economic activity that Fed Governors believe to be sustainable.  They suggested gradual increases going forward, as they expect continued improvement in economic fundamentals into 2016.  Interest rates shot higher with the announcement as the 10-year Treasury yield climbed to 2.35% from 2.10% at the beginning of the week.

The final two trading days of the week were completely different.  Cratering oil prices and junk bond fears sparked an equity sell-off, leading the S&P 500 to its largest two-day loss since August.  By the close of the week, the S&P 500 index had given up the gains of the first three days, closing the week at 2,006. Bond yields fell as investors sold risk-based assets in favor of the safety of  U.S. Treasuries.  The long bond closed the week at 2.21%.

So far, this month has registered 12 days with moves of 100 points or more, the most since December of 2008.  With only a handful of trading days left before the end of the year, the S&P 500 is down roughly 2.59%.  The economic calendar has several significant data releases over the next two weeks.  Trading volumes tend to be lite during the holiday shortened weeks, setting the table for continued volatility on a day-to-day basis.


Weekly Market Commentary

December 7th – December 11th

Amid a week of very light economic data, equity markets moved sharply lower across the globe.  Last week’s European Central Bank action was less reaching than many analysts had projected, disappointing investors and setting the tone for some potential market weakness.  While there was little U.S. data to consider, a Chinese export number came in slightly below expectations, once again stoking fears concerning the strength of the Asian economy.  The continued decline in oil prices also weighed on investor enthusiasm.

Equity markets fell on 4 of the 5 trading days, with the largest decline on Friday.  For the week, the S&P 500 fell 79 points or 3.78%.

U.S. Treasuries saw inflows on the equity weakness, driving 10-year yields down by .12%, closing the week at 2.25%.

Next Wednesday the Federal Reserve will announce their decision concerning short-term interest rates.  We expect the Fed to raise the Federal Funds rate for the first time since 2006.  However, we also expect them to provide significant assurances that they are not on a pre-prescribed course of rate hikes.  Rather, we believe they will indicate that future rate decisions remain highly dependent on economic data, and that they have the flexibility to remain patient in implement policy that is consistent with their long-term goals.

Weekly Market Commentary
November 27th – December 4th
After closing last week relatively unchanged at 2,090, volatility picked up during this week. In addition to a host of economic data, the European Central Bank met on Thursday to discuss and announce their policy decision and OPEC met on Friday to discuss and decide upon oil output targets.
Over the first three trading days, the moves were relatively modest with a slight downward trend. Most of the November data released across the manufacturing and services sectors were weaker than anticipated, giving some concern over the health of the economy heading into the end of the year.
Volatility picked up on Thursday when the ECB announced their intentions to extend their Quantitative Easing program by 6 months, pushing the bond buying into March of 2017. However, the announcement fell short of investors’ expectations of an increase in the amount of bonds being purchased. Stocks across the globe sold off leading to the worst one-day sell of here since September as the S&P 500 declined by 30 points, just shy of 1.5%. Interest rates rose across the globe pushing yields on all Sovereign debt higher. The Euro also rallied against the dollar with the biggest one-day move since 2009.
Eyes shifted back to the U.S. early Friday as the Bureau of Labor statistics was set to announce November job numbers. For the month, the economy created 211,000 new jobs, 21,000 above analyst expectations. September and October employment was also revised modestly higher. Initially, stocks gave back all of their pre-market gains, suggesting investors were now reacting to an even greater likelihood that the U.S. Federal Reserve would begin increasing short-term rates next month. However, the fear quickly turned to optimism. The U.S. equity market rallied throughout the trading day. The S&P 500 closed the day with an impressive gain of 42 points, or 2.07%. The NASDAQ had a rate triple digit gain of 104 points.
Much like last week the broad market index registered little change, closing at 2,092. However, the path to that result could not have been more different.
OPEC’s decision to increase production limits sent oil futures reeling, at one point dropping below $40.00/barrel, while closing slightly above that level at $40.11.
With another respectable employment report in the books, it seems increasingly likely the Federal Reserve will begin to raise interest rates for the first time since 2006. Based on todays’ reaction, it appears as though investors are buying into the notion that if the Fed is comfortable raising rates, the prospects for stable economic growth remain intact. 
Weekly Market Commentary
November 23rd – November 27th
Despite a decent amount of economic data releases, equity markets were unusually quiet even for a holiday shortened trading week. Third-quarter GDP was revised higher by 6 tenths of 1%, registering at 2.1%. Most of the manufacturing, service and housing data released revealed an October pickup in activity from the soft September data. Meanwhile inflation remained subdued, with Core CPI registering at 1.3% year over year.
The S&P 500 opened the week at 2,089 and closed at 2,090. The broad market index did not move by more than 3 points on any given trading day. Interest rates declined slightly across the yield curve, but the movement was muted. The 10-year yield closed the week at 2.20%.
Next week’s economic calendar in packed with data throughout the week, ending with Friday’s employment report. International news will also be closely watched as the European Central Bank will meet on Thursday after hinting at further monetary policy easing and OPEC will meet on Friday to discuss oil supply levels amid the weak price environment.
Weekly Market Commentary
November 16th – November 20th
Last week equity markets trended down with the S&P 500 losing over 3.5%. After the tragic terrorist attacks in Paris over the weekend, it would have been understandable if investors turned more skittish at the opening of the week despite the fact that outside of the September 11th attacks on New York City, these terrorist atrocities generally have not had a long-lasting impact on equity markets. Even still, the breadth of the attacks across Paris gave reason for pause.
Instead, equity markets across the globe registered solid gains at the opening of the week. Perhaps the strength and swiftness of the French law enforcement units’ response assuaged some investor concerns. Then on Wednesday, the release of the last FOMC meeting revealed a “hawkish” tone, suggesting a greater probability of Federal Reserve tightening at the December meeting. Once again, rate hikes have often been the cause of more selling activity in equities, but markets rallied strongly Wednesday afternoon. It appears as though investors are starting to believe the FOMC’s willingness to raise rates is a sign that U.S. economic fundamentals are stable, and are becoming accustomed to the idea that a rate increase is inevitable. We would also suggest that the pace of rate increases after the initial lift-off is likely to be very slow, which should cause little disruption in capital markets.
All of this transpired amid ongoing mediocre U.S. Economic data, which outside of employment remained tepid at best. Bond yields fell across the curve over the course of the week as investors pulled money from the safety of bonds and added to equity positions. For the week, the S&P 500 regained most of the lost ground last week, keeping the index within a tight range of the year opening levels.
Weekly Market Commentary
November 9th – November 13th
After last week’s blow-out employment report, very little data hit the tape this week. On the employment front, jobless claims remained relatively unchanged, while job openings jumped back up to 5.526 million, approaching the recovery best level of 5.668 million set in July. Combined with last week’s report, the employment picture looks quite solid, despite wage growth that remains modest.
Despite subdued inflation data in the Producer Price Index, a host of Federal Reserve governors expressed their belief that the zero interest rate policy should be ending soon. Whether or not that means the Federal Reserve will actually increase the Fed Funds Rate at the December meeting remains unclear, but if not December, then shortly thereafter in 2016. These announcements dampened equity investor’s enthusiasm, pushing markets sharply lower on Thursday and Friday after trading modestly lower during the first three trading days of the week. For the week the S&P 500 lost 76 points, or 3.62%.
Long-term Treasury bond yields which popped higher last week after the employment report, moved gradually lower during the week, closing at 2.27%. Given the “tough talk” from the Fed, it was somewhat surprising to see rates move down across the yield curve over the course of the week.
The economic calendar picks up next week with several data points cover housing, manufacturing and inflation scheduled to be released.
Weekly Market Commentary
November 2nd – November 6th
In advance of the Friday employment report, investors were treated to a wide range of data in the areas of manufacturing, construction, consumption and services. In aggregate, recent trends in each area continued. Manufacturing remained subdued, construction and consumption continued to grow and the service sector of the economy continues to provide a reasonable basis for aggregate growth in economic activity. The biggest surprise was the large jump in automobile sales during the month of October.
Stocks moved higher at the outset of the week, as the S&P 500 crossed the 2,100 mark for the first time since August 17th which was just prior to the market correction. Trading was lite on Wednesday and Thursday with a slight downward bias as investors awaited Friday’s employment report. Given the generally hawkish tone of Fed Chairperson Yellen’s congressional testimony on Wednesday, investors were putting even more attention on Friday’s employment report. The BLS report revealed the economy created 271,000 jobs during the month of October, well above the anticipated 180,000. In addition, the unemployment rate dropped to 5.0%, and perhaps more importantly, hourly wages posted the biggest year-over-year gain since 2009. The strength of the report suggests the hiring slowdown at the end of the summer was more than likely a temporary condition. The S&P 500 traded down for most of the day, but finished with a loss of only 1point, closing at 2,099.  For the week, the index gained 0.94%
Given the strength of the employment market, the Fed is far more likely to increase short-term interest rates at the December meeting. As a result, interest rates increased on the day with the 2-year Treasury yield rising 17 basis points, closing the week at 0.87%. The 10-year Treasury yields increased by 18 basis points to close the week at 2.30%.
Weekly Market Commentary
October 26th – October 3th
Economic data released during the week continued to paint a picture of a U.S. economy that remains mired in a slow growth environment. Manufacturing and New Orders data declined during the month of September, coming in below analysts soft forecasts. The area of greatest strength thus far this year, housing, also disappointed. Housing Starts and Pending Home Sales both came in well below expectations. While there may be some seasonality associated with the decline, we have become accustomed to stronger housing data in recent months. Early indications are that rising prices slowed activity, suggesting the recovery in home prices may slow in coming months.
The first estimate of third quarter GDP was released Thursday. The first estimate suggests the economy grew at a sluggish rate of 1.5%, compared to expectations of 1.7%. Consumer spending and housing accounted for a good portion of the growth, while export activity continues to suffer from the relative strength of the U.S. dollar. Next week we will see a deluge of data, culminating with the employment report on Friday. Based on the surprising weakness in last months’ report, analysts will be closely monitoring the results.
Equity markets were mainly quiet during the week, moving slightly lower over the first two trading days. Markets jumped Wednesday afternoon after the release of the Federal Reserve meeting minutes. Of course, the Fed did not increase short-term rates, but investors were surprised by the hawkish tone, suggesting a rate hike in December is still very much on the table. The equity market reaction was interesting. All through this recovery, a Fed decision to keep rates low has been met with strong purchases of equities, driving markets higher. After the September announcement, equity markets sold off when the Fed announced they would not raise rates. At that time, it was believed that perhaps the Fed knew more about the recent volatility and was concerned over the potential long-term health of the economy. The hawkish tone from Wednesday seemed to reassure investors that economic conditions are now more stable, prompting another round of equity purchases. We have spent years operating under the paradigm that bad news on the economy is good news for investors, as the Fed would continue to keep their foot on the pedal of economic growth. It appears as though we have now shifted to a good news is good news mentality. If the Fed is willing to increase interest rates, then perhaps that is really a good thing in the long run…at least for now!
Bond yields continued to climb, with the 10-Year Treasury yield closing at 2.12%, .05% above last weeks close. Next week’s economic calendar is packed with information, with the previously mentioned employment survey closing the week. With only two months left in the year, the Fed is running out of data points to consider prior to the December meeting. A bounce back in employment may be all the Fed needs to move in December. However, another week month would likely have them on hold until 2016.
Happy Halloween! 


Weekly Market Commentary
October 5th – October 9th    
As is typical of the week after the BLS employment report, very little economic data was released over the course of the week. On Monday we saw two data points that suggested the service sector of the economy continued to grow at a reasonable, albeit slightly slower pace during the month of September. The weekly jobless claims report released on Thursday showed a decline in filings.
Perhaps of most interest was the release of the minutes from the last Federal Reserve meeting. The minutes confirmed the general belief that the Federal Reserve members in aggregate were concerned about financial market turmoil emanating from China and Emerging Markets. While committee members believed it was a close call, they decided to refrain from increasing rates in order to ensure overseas issues would not dampen U.S. economic prospects. The minutes referenced an increase in down-side risk that warranted a wait and see approach. The minutes also revealed that most members thought that a rate hike would be warranted by the end of the year.
Despite the nervous jitters of August and September, investors decided to welcome the Halloween fright month of October with impressive gains, picking up on positive momentum from the prior week. The S&P 500 registered healthy gains on Monday, Wednesday and Thursday, driving a weekly gain of 3.26%. Since the recent S&P low of 1,882 on September 28th, the index has gained 7.06%, closing the week at 2,015. Overseas markets took their cues from the U.S., leading to a broad-based global recovery in equity values. Among other notable action, oil futures gained 9% on the week and commodity stocks rallied heavily.
Bonds sold off accordingly, as the 10-year Treasury yield increased from 1.99% at the beginning of the week to close at 2.10%.
Finally, the VIX index, which is a broad measure of market volatility continued to decline to more normal levels, suggesting an easing of risk aversion related to equity markets.
Weekly Market Commentary
September 28th – October 2nd    
After the Federal Reserve decided not to increase short-term interest rates two weeks ago, many investors were looking to the employment report at the end of this week for clues as to whether or not the Fed would actually increase rates in 2015. Throughout the week a wide array of data across several areas of the economy was released. In general, most of the data continued to suggest the U.S. grew at a tepid pace, with housing as a source of strength and manufacturing continuing to weigh on aggregate economic activity.
For months equity investors have been concerned about what would happen to stock prices when the Fed decided to being raising rates. The general expectation was that Federal Reserve action would have a negative impact on stock prices. Thus, as Fed meetings continued to maintain the zero interest rate policy, stock investors cheered the decision. A notion that bad news is good news held sway over investor sentiment.
The decision two weeks ago bucked this long established reaction. This time, when the Federal Reserve didn’t move rates, equity investors began to think that perhaps the recent market turmoil and signs of softer global economic activity were even more problematic. As a result, after the Federal Reserve decided not to raise rates, equity markets sold off.
Heading into this week, investors were anticipating a strong jobs report at the end of the week which would increase the likelihood that the Federal Reserve would in fact increase interest rates by year’s end. Prior to Friday’s release equity markets remained volatile throughout the week, alternating between gains and losses.
Friday morning’s employment report came as a shock to most economists and investors as the Bureau of Labor Statistics report indicated only 142,000 jobs were created in September, far less than the expected gain of 200,000. Additionally, July and August data was revised lower (-59,000 combined), suggesting the employment situation heading into the back half of the year has been weakening.
Prior to the release, U.S. equity futures looked poised to start the final trading day with solid gains. However, the soft employment data spooked investors, turning what looked like a positive day into an apparent negative one. After falling by over 259 points early, the Dow Jones Industrial Average staged a mid-day comeback, closing with a strong gain of 200 points. For the day, the broader S&P 500 index gained 1.43%, leading to a weekly gain of 1.0%.
The weak employment data decreased the expectation for Federal Reserve action prior to the end of the year. It also continued to stoke concerns of global economic weakness.  As such, Ten-Year Treasuries gained 2.88%, pushing the yield down to 1.98% at the close of the week. The Federal Reserve will have two more employment reports to consider prior to their December meeting. To be sure, a continuation of the recent trend will go a long way towards keeping the Fed on the sidelines for the remainder of 2015 and likely early 2016.
With the weakness in the September employment data behind us, investor focus will once again shift to data from overseas, particularly China, as it has been at the epicenter of recent global worries. An industrial production report released earlier in the week showed the slowdown in manufacturing activity abated in September, but only rebounded slightly, remaining in negative territory. While three weeks ago Chinese officials indicated their willingness to implement additional fiscal stimulus measures, they have yet to announce any specific policy measures.
Weekly Market Commentary
September 21st – September 25th   
This week the economic calendar continued to confirm the general trend of 2015. Housing activity remains quite healthy, the employment situation continues to show signs of steady strength, while the manufacturing sector remains mired in a low growth pattern. At the end of the week, second quarter GDP was revised higher, from 3.7% to 3.9% on the strength of consumer spending.
Despite a steady U.S. economic outlook, investors remained more concerned about the state of the global economy. Ironically, the Fed’s decision to maintain short-term interest rates at 0% served to increase investor uncertainty. In the past, a Fed decision to maintain policy drove markets higher. In this most recent announcement, investors shed risk-based assets, fearing the Fed’s decision was driven by concerns over the recent global turmoil, and believed perhaps the Fed knew more about trouble brewing in global financial markets.
After a modest increase Monday, equity markets across the globe pulled back through Thursday, while U.S. Treasuries rallied on the “flight to safety” trade.  With investor sentiment being so unsteady, Wednesday’s revelation that German auto maker Volkswagen deliberately rigged diesel cars to cheat U.S. emissions standards pushed markets lower. Thursday evening, Chairperson Yellen delivered a speech in Massachusetts concerning inflation. During the discussion, she expressed her belief that the Fed would, in fact, increase short-term interest rates before the end of the year. Overnight, Asian and European equity markets rallied on the news along with U.S. equity market futures contracts.
The positive sentiment continued throughout the day overseas, but faded in the U.S. While the DJIA managed a gain of 114 points fueled by the Nike earnings report, the S&P 500 closed the day flat after rising by over 1% earlier in the day. The late day retreat was focused in the Healthcare sector, particularly a large sell-off in biotech. The IT sector also provided some downside momentum.  For the week, the index declined by 1.38%. Ten-year U.S. Treasury yields closed the week at 2.14%, 4 basis points higher than last week’s close.
Weekly Market Commentary
September 14th – September 18th  
This week the economic calendar took a back seat to the two-day FOMC meeting that began on Wednesday.   Prior to the recent turmoil in financial markets, most analysts believed the Federal Reserve would finally begin the process of raising short-term interest rates. However, the sudden spike in volatility and a moderately tightening credit environment reduced the probability of a September increase. There were those who believed the Federal Reserve was and remains part of the uncertainty, and that equity markets would benefit from more clarity that the Fed was actually going to begin a program of slowly rising rates.
Heading into the meeting equity markets posted a surprising gain as the S&P 500 gained 1.70% through Wednesday. Thursday’s announcement, which left the Federal Funds Rate unchanged, was first met with investor enthusiasm, as equity markets jumped by 1%. The enthusiasm was quick to wane, and equities posted a modest decline by the close of the day. Markets continued to slide Friday as investors became incrementally concerned that global economic conditions may be even weaker than expected, prompting the Fed to hold back on their plan to increase rates by the end of 2015. The S&P 500 closed the week at 1,958, which was 3 points lower than the opening level.
10-Year Treasury yields which had climbed to 2.30% prior to the announcement quickly declined, with investors snapping up Treasuries on the news the Fed remained on hold. The long-bond closed the week at 2.13%.
After a week of high anticipation over Federal Reserve policy we close the week in pretty much the same position in which we started. Uncertainty over the state of global economic conditions primarily due to Chinese activity and Emerging Markets, and wondering when the Federal Reserve will make good on their promise to normalize rates in the United States. Perhaps one thing we learned is that Federal Reserve policy decisions are clearly inclusive of overseas activity, which can ultimately impact the economy here at home. Many argued that conditions in the U.S. warranted an increase in the Federal Funds rate. While the Fed Chairperson Yellen did reference a desire for stronger employment data, and deflation caused by energy prices, she also highlighted the recent global turmoil as a component of the decision.
Weekly Market Commentary
September 7th – September 11th
The holiday-shortened week provided little additional information with respect to the health of the U.S. economy. Weekly jobless claims continued to hold steady, while job openings rose to a record high in the month of July. Despite the apparent demand for labor, wage growth for the average employee remains elusive. Consumer sentiment fell during the month of September, likely reflecting the stream of news concerning global growth fears and market volatility.
Meanwhile, Chinese government officials sought to quell the panic in their markets by suggesting the market was in a bubble, but the sell-off had likely run its course. Officials also suggested the government would spur economic activity with a substantial fiscal stimulus package. By the end of the week, rumors concerning a 1 Trillion Yuan ($160 billion) stimulus package were hitting the news wires.
Next week the Federal Reserve will meet on the 16th and 17th. The policy announcement will be released on the 17th. The Fed must weigh signs of ongoing improvement in domestic growth with global concerns over aggregate economic activity and the recent spike in volatility across financial markets. Foreign Central Bank leaders and International Monetary Funds have urged the Fed to delay action until 2016. Prior to the uptick in market volatility, a September rate hike appeared more likely than not, as the Fed appeared intent on beginning a slow process of increasing short-term rates before the end of the year. However, the recent market action and its impact on global growth prospects have thrown another variable into the mix ahead of their decision.
Volatility continued to rule throughout the trading week. Equity markets gyrated between large gains and losses at the open of the week, with more subdued action into the closing trading days. For the week, the S&P 500 index gained 2.07%
Bond yields traded within a tight range through the week, with the 10-Year U.S. Treasury closing the week at 2.19% after opening the week at 2.13%.
Next week’s economic calendar offers a few data points in the areas of manufacturing, industrial production, retail sales and consumer prices. However, all eyes will be trained on the Federal Reserve policy announcement on Thursday at 2:00. Additionally, any confirmed news out of China that details a plan to stimulate growth would also have significant market impact.
Weekly Market Commentary
August 31st – September 4th   
Once again, domestic economic data took a backseat to jitters over slowing global growth. Equity markets moved lower during the first two trading days, bounced back Wednesday, treaded water on Thursday, and then resumed the decline on Friday.
While most of the economic data released continued to point to trend-line U.S. growth, a weak manufacturing report out of Hong Kong spooked investors prior to the market open on Friday. Also, prior to the open, the Bureau of Labor Statistics reported the U.S. economy created 177 thousand jobs during the month of August. While this was below the forecast of 217 thousand, upward revisions were made to prior months and the unemployment rate fell to 5.1%. Also in the report, average hourly earnings grew more than anticipated.
On balance most believed the report increased the likelihood the Federal Reserve will increase rates in September, despite concerns over deteriorating global fundaments emanating from China and Emerging Markets. Referencing their concern over global growth, the European Central Bank announced a modification to their Quantitative Easing program, and also the potential to increase the amount or extend the duration of the initiative. On the day, the S&P 500 dropped -1.54%, contributing to a weekly decline of -3.4%.
After ticking up early in the week interest rates on the long end of the curve moved lower by week’s end, with the 10-year U.S. Treasury closing with a yield of 2.13%
Equity markets continue to move on global growth data/concerns and policy initiatives undertaken at home and abroad. Uncertainty over Federal Reserve policy has exacerbated the worry, which will not likely be clarified until their September 17th rate announcement. In the meantime, we expect continued volatility in global equity markets.
Weekly Market Commentary
August 24th – August 28th   
After a punishing week in equity markets last week, U.S. markets opened Monday with a stunning 1,000 point drop in the Dow. Investors had hoped for policy announcements out of China during the weekend that would help spur economic activity.    When nothing materialized, overnight markets pointed to a sharp decline.   The initial 500 point drop was met with program trading that continued to push markets even lower. The Dow quickly recovered most of the declines through mid-morning, but the afternoon trade pushed markets lower, with the Dow closing with a loss in excess of 600 points.
Tuesday looked as though market bulls would break the streak of negative trading days as the Dow climbed in excess of 300 points. However, late day trading activity pushed the index down another 200 points. Tuesday witnessed the largest redemption from retail mutual fund investors in the last 8 years, totaling over billion.
Investors got what they were looking for from China Wednesday evening in the form of interest rate cuts, lower bank reserve requirements and liquidity injections. While the volatility and wild swings continued, the Dow finished with a gain in excess of 600 points. Thursday continued to see heavy swings, this time the positive momentum was fueled by a report that U.S. 2nd quarter GDP was revised significantly higher, from the original report of 2.3% to 3.7%. The index closed up over 350 points on the day.
Friday’s trade was activity was far less exciting with averages moving between slight gains and losses, closing relatively flat. It appeared as though a little trading fatigue hit the street prior to the weekend.
Concerns about the global impacts of slower Chinese growth and the heavy uptick in market volatility called into question the upcoming decisions by the Federal Reserve. Prior to the volatility, investors anticipated a Federal Reserve rate hike in September. Cratering commodity prices and slower inflation data have also limited the potential risks of inflation, giving Fed governors sufficient cover to delay any increase. Investors worry that any Federal Reserve tightening could squeeze liquidity in markets, further exacerbating the heightened level of uncertainty emanating from China. The Federal Reserve meets this weekend for their annual Jackson Hole sojourn. Given the recent events, even greater attention will be paid to Vice Chairman Stanley Fisher’s speech. Chairperson Yellen will not be at the conference.
Throughout the first 7 months of 2015 equity markets had been trading in the tightest trading range in history, indicative of the uncertainty concerning the short-term outlook. The news from China provided nervous investors with a rationale to take money off the table. While we believe there is a reasonable fundamental concern, we also believe the selling was overdone. That is not to say we believe the volatility is over and we are “through the woods” on market volatility and risk. There are those out there who remain long the market that will continue to use rebounds as selling opportunities. However, we do believe that the recent market volatility is indicative of a necessary correction, not the onset of global recession. As gut wrenching as they may be, market corrections are normal occurrences, which we have not had for quite some time.
Weekly Market Commentary
August 17th – August 21st  
The few data releases of the week were generally positive. Housing Starts and the Housing Index both continued to show the strength in this segment of the economy. Housing remains one of the major bright spots in the U.S. in 2015. Regional manufacturing data was mixed. While the Empire State index came in well below expectations, the Philly Fed index was stronger than anticipated. The National PMI Flash Manufacturing index for the month of August registered a weaker level than anticipated, but still indicated growth in manufacturing activity thus far in the month. Also in the U.S., the release of the last Federal Reserve meeting minutes suggested Fed. Governors were still split over whether or not to begin the process of raising short-term interest rates.
However, the market driving news surfaced from overseas on Thursday, pushing global equity markets to their steepest declines of the year. Throughout 2015, the S&P 500 has traded within a very tight trading range, beginning the year at 2,059, falling to a low early in the year of 1,993, then reaching a high in May of 2,131. Given a reasonable amount of uncertainty across the globe, and equity valuations that are at least in a range of “fair value”, investors had little catalyst to act in either direction.
Thursday’s announcement out of China that manufacturing growth had slowed to the lowest levels in 6 years gave those who were skeptical of the markets potential the rationale to sell. The global sell off began in Emerging Markets, then spread west to Europe and the U.S. By the end of the day, the S&P 500 lost 2.1% to close at 2,036. The announcement was particularly troubling to investors as it came on the heels of last weeks’ announcement that China let it currency devalue to a greater degree. Allowing the currency to float lower was likely an effort to spur export activity, signaling leadership has been unable to generate sufficient growth through other measures.
While growth in the U.S. remains steady, and European data thus far signals improvement over last year, concerns of shrinking global growth was enough to sway sentiment during the week.
The decline for the week of 120 points in the S&P 500 leaves the index down 4.27% since the beginning of the year. With the S&P 500 breaking below the prior year-to-date floor, it remains to be seen whether investors will once again see the decline as a short-term opportunity to add equity holdings. Surely this was not the case this week as selling accelerated into the close on both days.
Next week’s calendar holds more data points than this week, but in all likelihood, any market moving news will more likely emanate from overseas and the Federal Reserve. With global commodity deflation, recent currency moves in China and domestic data that despite the strength in services and housing, remains below long-term trend growth, Federal Reserve has sufficient rationale to delay any policy changes that would adversely impact economic growth.
Thus far in the trading cycle this year, selling activity has been followed by bargain hunters looking to capitalize on the negative sentiment and cheaper prices. This week, fewer buyers were willing to commit capital. Instead markets registered steep declines through the final two trading days. This may be partially due to the other negative headlines emerging from Greece, and the threat of conflict between North and South Korea which spiked mid Friday afternoon. Surprisingly, gold and U.S. Treasuries only registered modest gains over the two days. These traditional “flight to safety” vehicles did not appear to receive significant flows from the equity liquidations, suggesting investors moved money to cash. This may make for an even more interesting setup to next week’s trading activity.
Weekly Market Commentary
August 10th – August 14th
While the economic calendar was somewhat sparse this week, the few pieces of data that were released were somewhat more positive than anticipated. First and foremost, retail sales data for the month of July came in stronger than expected, along with upward revisions to both May and June. All things considered, it appears as though consumers may have loosened up the purse strings a little more than thought over the summer months. Industrial production also surprised to the upside, particularly in the manufacturing component which has been expanding at a tepid pace over the course of the year.
Once again, the big news this week emanated from overseas. China surprised investors by loosening the currency peg on the yuan, allowing the currency to devalue over three straight days. Over the past two years China has been struggling to support growth, primarily focusing on domestic demand enhancements. With this most recent move Chinese officials appear to be accepting the notion that simply trying to improve domestic consumption will not be enough to maintain their target growth level of 7%. All things being equal, the devaluation of the Yuan should spur greater export activity.
Caught off-guard by the move, investors quickly sold high-risk assets in search of safer ground, affording the opportunity to consider the implications on the global macro environment and specific company exposures to a cheaper yuan. Equity markets had traded sharply higher on Monday, but much of the gains were given back on the following day. For the remainder of the week U.S. equity markets traded with a modestly upward bias. The S&P 500 finished the week up by14 points or 0.67%.
Ten year U.S. Treasury yields ended the week at 2.20%, little changed from the prior week’s close of 2.17%. Yields at the short-end of the curve were unchanged. Stronger than expected economic activity enhances the likelihood of a September interest rate hike. However, the devaluation of the Yuan will likely provide further headwinds to U.S. economic growth, a new factor which Fed. Governors will need to consider at the upcoming meeting.
Weekly Market Commentary
August 3rd  – August 7th
Economic data released early in the week did not break any of the recent trends with respect to manufacturing and the service sectors of the economy. On the manufacturing front, activity continues to grow at a tepid pace, while the service sector of the economy appears to be firing on all cylinders. Employment data released on Wednesday from ADP suggested a slowdown in hiring activity, but still a respectable 185,000 jobs created during the month of July, while expectations were for 210,000 jobs.
Stock and bond markets traded back and forth over the course of the week, hinging on the strength of the data and various speeches given by Federal Reserve governors offering glimpses into their thoughts concerning a September rate hike. Friday’s July employment report which came in roughly as expected, 215,000 jobs created vs. expectations of 220,000, did little to sway opinions one way or the other. In general terms, the recent path of employment remains somewhat below the stronger growth registered last year, but by no means does growth appear to be deteriorating.
Stock trading volume was very lite during the course of the week, and continued to be muted, even after the employment report, but the general trend for the week was negative. This can likely be credited to information that didn’t surprise in any way, and a more typical summer week, where vacations leave Wall Street feeling somewhat empty.
Meanwhile, the probability of a September rate hike increased, as Federal Funds futures contracts suggest a 75% probability of the long-awaited Federal Reserve action.

For the week, the S&P 500 gave up 25 points, or 1.19%. Ten year U.S. Treasury yields actually declined by .01% to close the week at 2.17%.

Weekly Market Commentary
July 27th – July 31st
Economic data over the last month continued to confirm the U.S. economy’s ongoing growth, at albeit a modest pace. Data from the past week had hints of improvement as national durable goods data and manufacturing activity picked up during the month of July. The service sector also showed an increase in activity during the month. Meanwhile, the first report on 2nd quarter GDP suggested GDP grew at a modest 2.3% pace, while 1st quarter GDP was revised up to 0.6%. Thus far, the uptick in July reports has the third quarter starting off on firmer economic ground.
After falling for 5 straight sessions through Monday, equity markets picked up for the remainder of the week, with the S&P 500 finishing the week with a gain of 1.17%. For the year, the S&P 500 is now up by 2.23%. European markets also posted positive performance on improved economic activity and continued relief of “Grexit” headlines. The mitigation of Greek fears drove European returns for the month of July to the best monthly return in 5 years.
The Federal Reserve statement was released Wednesday afternoon with little change in the statement. The Fed continues to watch for signs of sustainable economic expansion in line with historic growth trends. The employment situation remains a key metric for the Fed in terms of both sustainable growth and potential inflation.
Stock buying resulted in bond market outflows and falling Treasury yields. Ten-year U.S. Treasuries opened the week at 2.26% and closed at 2.2%. Yields also dropped at the short-end of the yield curve, suggesting investors may be pushing out their expectations for the timing of a Federal Funds rate increase.
A good amount of data will be released throughout next week, culminating with the July employment report on Friday. We expect lite trading activity in advance of Friday’s data.

Weekly Market Commentary

June 22nd – June 26th 
A host of economic data was released throughout the week, with the lion’s share remaining very consistent with prior data. Broadly speaking, manufacturing data remained slow. We have yet to see an uptick in production activity that we have become accustomed to seeing at this time of year. Similarly, but on the positive side, Existing Home and New Home Sales continue to be robust. Consumer spending also turned a little more positive during the month of May. However, the service sector of the economy unexpectedly slowed during the month of May. Finally, first quarter GDP was revised to -0.2% from the previously reported -0.7%. All things considered, another week of data that suggests the economy remains mired in a sub-standard growth pattern that has become all too familiar since the Great Recession of 2008.
Stocks continued to trade in choppy waters over the course of the week. This week, the progress or lack thereof, regarding the Greek debt negotiations seemed to provide the trading fuel for each day, both positive and negative. The week started out with two days of gains on hopes of a compromise, but news of no deal on Wednesday and Thursday diminished investor sentiment. On early hopes of a 5 month credit extension, Friday’s trade started out modestly positive, but as the day drew to a close without a deal, markets retreated and the S&P 500 closed unchanged for the day. For the week, the S&P 500 Index lost -0.4%.
Bond yields rose during the week as the Ten-Year Treasury yield closed at 2.47%, after opening the week at 2.27%. Much like equities, the long bond continues to trade in a tight range with the yield remaining between 2.25% and 2.50% over the last few weeks. Economic and Federal Reserve policy uncertainty continue to provide a backdrop for the range-bound trading.
Weekly Market Commentary
June 15th – June 19th   
The economic calendar gave investors information pertaining to manufacturing and housing during the week. Generally, the data was consistent with prior months. Of the three manufacturing data releases, two were below expectations while one was positive. On balance, the data suggests manufacturing and production activity remained constrained through May. The one positive data point, the Philadelphia Federal Reserve Business Outlook was very strong. It was the only release that reflected data through June, suggesting that perhaps it may be indicative of strength in future reports. Housing data continued to be very positive, making housing one of the biggest bright spots in the economy so far this year.
The Federal Reserve met during the week with the policy announcement released on Wednesday. The sub-par growth experienced thus far in the year gave the Federal Reserve a justification to continue with a dovish policy stance. This is how many investors interpreted the release, and it showed in the markets. Stocks the week with a loss, but subsequently climbed on the following three trading days. Friday’s action witnessed the S&P 500 index give back 11 points. For the week the broad index closed at 2,110, 0.76% above last weeks close.
Bond yields dropped during the week as the Ten-Year Treasury yield closed at 2.27%, after opening the week at 2.39%. As expectations for pre-emptive or aggressive Federal Reserve action declined, the yields across the curve fell.
Next week’s calendar is filled with data releases once again covering manufacturing and housing, but also including business and consumer spending.
Weekly Market Commentary
June 8th – June 12th   
Investors didn’t have too much data to consider this week, particularly for the first three days. Initially, equities continued their slide from last week, moving lower on the first two trading days. Bond yields also continued the trend from the prior week, moving higher through Wednesday, with the 10-Year Treasury closing at 2.48%.
After giving up much of the year’s small gains in the prior sessions, stocks rallied heavily on Wednesday, pushing the S&P 500 up by 25 points or 1.2%.  Most cited progress in the Greek debt negotiations as the catalyst for stock gains.  A strong retail sales report released Thursday morning gave further support to stocks, and the S&P 500 improved by a modest 4 points. Meanwhile, Ten-year Treasury yields began to slide, closing the day and the week at 2.38%.
Despite mid-week optimism in Europe, further negotiations cast doubt on the potential for a Greek Debt deal, pushing markets lower. U.S. markets took cues from Europe with the S&P losing 15 points or -0.70% on the day. For the week, the broad indexed managed a gain of 2 points.
Once again, the economic calendar is “information-lite” next week, giving little clues as to the direction of economic growth and Federal Reserve policy.  Investor attention will likely remain on Europe and the Greek debt negotiations.
Weekly Market Commentary
May 25th – May 29th  
This was a heavy week for economic releases, culminating the with May employment report on Friday. Early week data, including releases on manufacturing, services, income, consumption and inflation remained consistent with prior month’s readings, all suggesting the economy continues to advance at a modest pace. The one strong release came from the automobile sales which increased significantly (7.9%) from the prior month.
Wednesday’s ADP employment report came in roughly as expected with the economy generating 201,000 jobs during the month of May. Friday’s BLS labor report ended the week on a more positive note, with non-farm payrolls increasing by 280,000, well above the expectation of 220,000. The unemployment rate moved slightly higher to 5.5%. However, the gain was due to an increase in the labor participation rate. Rising participation is generally seen as a good sign, indicating potential employees are returning to the job market.
Bond yields continued to rise across the globe during the course of the week. Improvement in the Euro-zone economy has eased the deflation concerns which had previously pushed yields to extremely low levels. The economic improvement has pushed yields higher across Europe, and here in the U.S. The 10-year Treasury began the week at 2.10%, but closed at 2.40%. While we still expect yields to remain range-bound due to continued economic concern, the recent spate of data has pushed the yield at to the middle of our anticipated range of 2.0 to 2.75%.
Similarly, stocks continue to trade within a very tight range. After beginning the year at 2,059, the S&P 500 peaked at 2,131 on May 20th. During that time the market has move back and forth with little traction in either direction. This week, the market moved lower. After opening the week at 2,107, the market traded modestly weaker, closing at 2,093. This represents a weekly loss of -0.66%, and a year-to-date gain of 1.65%.
Throughout the week, the primary driver of investor’s concern centered on the negotiations between the Euro-Zone and Greek officials. While both sides suggest progress is being made, the “drawn-out” nature of the negotiations has investors on edge. Additionally, the strong employment data Friday gives the Federal Reserve more justification to raise rates. While most suspect rates will not move in June, the possibility of a September increase appears more reasonable. Meanwhile, the International Monetary Fund urged the U.S. Federal Reserve to maintain current rate policy until 2016.
Concerns of aggressive Federal Reserve policy action have also contributed to some negative sentiment among stock investors. Investors are concerned policy action may be excessively pre-emptive, destabilizing an already fragile economic environment, and thus corporate earnings potential.
Weekly Market Commentary
May 25th – May 29th  
Amid a week of generally favorable economic data, equity markets continued on a generally “trendless” trading pattern, continuing the activity from the prior week. April data for Capital Goods Orders showed a welcome rebound for the months of April, indicative of resumption in business investment.   The service sector of the economy continued to grow at a healthy pace during May, while New Home Sales in April surprised to the up-side. While the Chicago Fed Report released on Friday surprised to the downside, it was eclipsed by the Q1 GDP revision. Initially GDP for the first quarter was estimated at a meager 0.2%. The revised number suggested a contraction of -0.7%.  While not welcome news, the downward revision was not unanticipated.
Once again equity markets traded back and forth throughout the holiday-shortened week. After starting the week at a level of 2,126, the S&P 500 index fell sharply on the opening day, and then recovered most of the decline on Wednesday. The market traded down for the remainder of the trading days, capped off by a Friday decline of 14 points. For the week, the S&P 500 lost              -0.89%, leaving the year-to-date return at +2.33%.
Fixed income yields fell during the week as investors added to positions of safety. The 10-year Treasury yield began the week with a yield of 2.21% and closed at 2.10%.
So far this year U.S. equity markets have traded in a very tight range. We believe this reflects investor’s lack of conviction concerning the direction of the economy and their concern over the path of Federal Reserve policy decisions. In our view, downside potential is more likely a function of investor’s skepticism over the economy coupled with a Federal Reserve rate hikes that may be viewed as premature.  We continue to believe equity markets remain within a range of fair-value, allowing for further improvement predicated on corporate earnings growth.
Weekly Market Commentary
May 18th – May 22nd  
Two primary areas of the economy were in focus this week. Housing started the week on a positive note with Housing Starts increasing by over 20%. This was one of the strongest months on record. Unfortunately, existing home sales came in slightly below expectations. Some of the weakness can be attributed to lack of inventory, perhaps supporting the strong uptick in new home development.
Manufacturing activity remained positive, but still soft, suggesting that manufacturers are not rushing to restock inventories in anticipation of greater sales activity. In prior years, manufacturing has slowed similarly during the winter months, only to move higher in the second and third quarters. We have yet to see significant evidence this year, but anticipate stronger manufacturing activity in the coming months due to relatively lean inventory levels across the supply chain.
The week prior to holiday weekends can often be quite volatile. Trading volume tends to be lite as investors are gearing up for a short respite. While volume lived up to expectation this week, the volatility was extremely low. The S&P 500 index traded up and down within a very tight trading range throughout the week (between 2,121 and 2,132). For the week, the index gained 3.33 points.
Bonds remained within a similarly tight trading range as 10 year yields moved between 2.14 and 2.22%. At the close of trading, the long bond ended the week at 2.21%.
All in all, a very quiet week in the market before the long holiday weekend.
Weekly Market Commentary
May 4th  – May 8th       
Despite two strong economic reports out of the service sector at the beginning of the week, stocks traded with losses. The losses continued through Wednesday with the release of the ADP jobs report which was weaker than anticipated and Federal Reserve Chairperson Janet Yellen’s comment concerning the high value of stocks and bonds. Equity markets turned around Thursday, positing moderate gains. However, investors were anxiously awaiting the April employment report from the Bureau of Labor Statistics.
Last month, the report showed a significant decline in job creation, signaling to some that the economy remains in a weakened state. Friday’s report eased those concerns. While the March data was revised even lower, the April report showed a return to strong job growth, posting gains of 223,000. The unemployment rate ticked down to 5.4%, the lowest reading since 2008. Equity investors cheered the news, driving the S&P 500 up by 28 points on the day. After a poor start, the broad index moved up by 0.4% over the course of the week. For the year, the S&P 500 has moved higher by 2.75%.
Interest rates were volatile during the course of the week. Higher global bond yields, particularly in Europe where yields had previously dropped to eye-popping levels, helped push U.S. rates higher. At Wednesday’s close the 10-Year Treasury closed with a yield of 2.24%. However, after Friday’s employment report yields fell back down, closing the week at 2.15%. On the heels of the strong employment report, investors are now betting that the Federal Reserve is more likely to raise short-term interest rates at the September meeting.
Weekly Market Commentary
April 27th  – May 1st  
The PMI Flash Service report for April opened the week’s economic releases on a positive note. While the manufacturing side of the economy has struggled, the April service data was very positive. Housing data was also more positive than analysts had forecast. Wednesday’s release of first quarter GDP confirmed what many had thought. First quarter GDP grew at a paltry 0.2% annualized rate, well below an already weak forecast of 1.0%. Exports and business capital spending were the primary culprits, pulling down aggregate activity. At the end of the week, manufacturing reports for the month of April were slightly more positive. Notably, the national Chicago PMI survey moved into expansion made, with the index jumping from contraction in March (46.3), to expansion in April (52.3). Readings above 50 indicate expansion, while readings below 50 signal contraction.
After reaching all-time highs at last weeks close, the S&P traded down modestly through the first three trading days. Wednesday’s Federal Reserve policy announcement, in which the Fed recognized the first quarter weakness but also suggested the data did not necessarily alter its expectation concerning policy changes, drove investor out of stocks. For the day, the S&P 500 lost just over 1%. However, the weakness was short-live. The market bounced back Friday, recovering all of the prior days’ losses. For the week, the S&P 500 traded down by -0.44%.
Unlike the stock market, the bond market traded steadily down. Heightened expectations concerning Federal Reserve rate policy pushed the bond prices down and interest rates higher. The Ten-year Treasury bond opened the week at 1.92% and closed .20% higher at 2.12%. Bonds have traded with a tight range all year long. On one hand investors expect the Federal Reserve to increase the short-term federal funds rate sometime this year. While on the other hand signs of economic weakness and low interest rates across the globe limit upside potential. We anticipate this tight trading range will continue throughout the remainder of the year.
Weekly Market Commentary
April 20th  – April 24th   
Early in the week, we received further confirmation that March was not a particularly good month for the Economy. The Chicago Fed National Activity Index fell sharply, driven by a decline in production activity. This report confirmed earlier data that pointed to continued weakness. On a more positive note, March existing home sales showed strong improvement with sales surging by 6.1% during the month. The housing market has been battered during the winter months, and perhaps we are seeing the beginnings of a thaw in activity. Also striking a more positive tone was the March Durable Goods orders which grew by 4% on the strength of the transportation sector. Ex-transports, the number registered a less impressive .2% contraction.
The grind higher continued in U.S equity markets with each day posting gains with the exception of a modest decline on Tuesday. Mixed earnings reports continued to hit the tape, but investors seemed willing to accept weak earnings releases that are caused by the strengthening U.S. dollar. The S&P 500 started the week at 2,081.18 and closed at 2,118.69, producing a gain of 1.80%. The NASDAQ faired even better with a gain of 3.25%, while the DJIA ended with a gain of 1.42%
After falling at the end of last week, 10-year U.S. Treasury yields moved modestly higher, closing at 1.93%, or .07% higher than last week’s close. The continuation of less than stellar economic data bolsters the belief that Federal Reserve Governors will decide to delay any change in short-term rate policy. Meanwhile, long-term rates continue to be held down by low global yields. Thus, bonds continue to trade in a tight range, generally driven fund flows related to equity market activity.
Weekly Market Commentary
April 13th   – April 17th       
Manufacturing data released over the weak continue to reveal weakness through the month of March, while a forward looking report out of the Philadelphia Fed suggested the slowdown in exports continues to hamper production in April. While this is one early regional survey, it is the first to suggest the Q1 slowdown could bleed into April. The housing market index provided cause for more optimism as did the consumer sentiment survey and positive March retail sales data.
Benign economic data and generally lackluster earnings releases did not dampen investor enthusiasm early in the trading week. The S&P 500 traded back and forth during the week, alternating between modest gains and losses through the first four trading days. Friday’s activity was far more decisive and negative. The Chinese government made regulatory changes overnight Thursday, which limited some leveraged purchase activity and increased the ability to sell stocks short. Apparently, Chinese officials became wary of the recent surge in Chinese equities, and sought to dampen speculative “long” activity through the rule changes.
Concerns over Greece resurfaced as the Syriza-led government continues to negotiate with international creditors. The country needs a deal by the summer in order to avoid default by securing additional bailout aid. Slow progress caused another rating downgrade, pushing it further down in junk territory.
The heightened uncertainty caused a global sell-off in risk based assets and a retreat to the safety of government bonds. For the day the S&P 500 lost 1.14%, leading to the loss on the week of 1.00%.
The flight to safety pushed the 10-year U.S. Treasury down to 1.86%, after closing last week at 1.95%. German 10-year bund yields declined to an astonishing .07%.
Next week’s economic calendar is uneventful until the end of the week when additional housing and manufacturing data will hit the tape.
Weekly Market Commentary
April 6th   – April 10th       
After last week’s employment report, data was exceedingly lite this week. Unlike the manufacturing sector of the economy which sputtered in the first quarter, the service sector report for March continued to show solid growth.   The low jobless claims report on Thursday suggested the poor March employment report may be an aberration.
Amid a low volume trading week, stocks made steady gains with the S&P 500 index improving by 1.67%. The index closed at 2,102.06, which was roughly 15 points below the all-time high reached on March 2nd of this year.
As investors added capital to stocks, bond prices dropped modestly, pushing the 10-year U.S. Treasury yield up to 1.95%.
Next week’s economic calendar picks up with information on retail sales, industrial production, housing, inflation and manufacturing activity.
Weekly Market Commentary
March 31st   – April 3rd  
Economic data released during the week continued to confirm a general slowdown in economic activity that was evidenced throughout the first quarter. Manufacturing reports suggested that while activity remains positive, it has slowed significantly from the 4th quarter of 2014. Consumer spending data also came in below analyst expectations, but consistent with recent slower consumption activity.
While equity markets were less volatile during this holiday shortened trading week, they continued to be relatively trendless, alternating between gains and losses. For the week the S&P 500 closed with a modest gain of .53%.
The biggest news hit the wire Friday morning, with non-farm payrolls coming in at 126 thousand new jobs, far below analyst forecasts of 246 thousand. The prior two months were also revised down. The unemployment rate held steady at 5.5%, while average hourly earnings improved by .3%, ahead of the .2% forecast. While the stock market was closed for the day, the bond market remained open. The weak employment data pushed yields down modestly, closing the week at 1.9%.
The implications of the weak employment report, which closed out a quarter of relatively soft macro-economic data, will most certainly have some impact on Federal Reserve rate policy. While the consensus view has been a likely move toward higher short-term rates in June, the Fed has consistently reiterated that any decision remains data dependent. The weak first quarter falls in line with the patter of the last few years which have experienced a slowdown at the outset of the year, followed by strong mid-year activity. Should that trend continue, then a second quarter rebound would be expected. If not, then Federal Reserve policy expectations are likely to change dramatically in the coming weeks.
Weekly Market Commentary
March 23rd   – March 27th  
After a week of nice gains in the equity market, commentary from some Federal Reserve Governors set the stage for a sell off this week. Governors Fischer Mester, Ballard and Evans all had speaking engagements during the first few days of the week. With the exception of Governor Evans, who suggested the decision to raise rates remains dependent on continued economic growth, the remaining governors were perceived to be more supportive of a mid-year hike in the Federal Funds Rate. Tuesday morning, Governor Ballard suggested that the hike may induce downside volatility in equity markets. Not surprisingly, the S&P 500 suffered its weakest two days on Tuesday and Wednesday. Last year many suspected the end of Quantitative Easing would cause a downturn in equity markets. However, by the end of the year, the S&P had a gain in the low teens. Now, with a potential for rising interest rates, equity investors are becoming increasingly skittish concerning the impact of Federal Reserve policy.
For the week, the S&P lost 47 points, closing at 2,061. The declined erased the gains of last week, and left the index roughly 3 points above the level at the beginning of the year.
Despite the policy discussions, economic data released during the week, was generally more negative. It is clear that retail spending, manufacturing activity, durable goods orders (a good proxy for business spending) and home sales remain challenged. On a more positive note, the service economy continued to expand at a reasonable pace and weekly jobless claims remained subdued. During a speech Friday, Chairperson Yellen repeated her belief that gradual rate hikes could begin sometime during the year, but suggested the Federal Reserve remains cautious in their approach. Interest rates remained relatively unchanged over the week.
Next week’s economic calendar is flush with significant reports, including manufacturing, housing and the all-important monthly employment report.
Weekly Market Commentary
March 16th   – March 20th 
As anticipated, economic data took a backseat this week to the Federal Reserve announcement Wednesday afternoon. Prior to the meeting, data concerning production, manufacturing and housing all fell short of expectations, with housing missing by the widest margin. However, given the severity of the weather, it should not have been a big surprise that housing starts in the Northeast were well below expectations, driving the national number down.
Heading into the FOMC announcement Wednesday, investors anticipated the removal of the word “patient” from the Fed’s formal statement. The reference to patient was in relation to the Fed’s anticipated timing over increasing the Federal Funds Rate. The Fed did live up to expectations by dropping the reference, although during her press conference, Chairperson Yellen went out of her way to quell any speculation the Fed would move earlier than anticipated (June), and that the decision remains subject to ongoing economic improvement.
Equity markets moved between gains and losses each day, but the trajectory was upward sloping, with gaining days outpacing losing days. For the week the S&P 500 Index gained 2.66%. On a year-to-date basis the index has gained 2.38%
After spiking to 2.24% on March 6th, 10-year Treasury Yields continue to move lower based on a combination of softer economic data over the past two weeks and the Fed’s ongoing willingness to bolster growth through accommodative policy. The long bond closed the week at 1.94%.
Next week’s economic calendar includes several national and regional reports on manufacturing, new home sales and Gross Domestic product.


Weekly Market Commentary
March 9th   – March 13th 
In terms of equity investing, sometimes good economic information can be bad news, and bad news can be good news. Such has been the case over the past week, which has witnessed a return to large daily swings in equity indices.
The volatility picked up last week, with the strong employment report, a fundamentally good thing for the economy. The strength in the employment number prompted concerns that the Federal Reserve might act more aggressively in moving interest rates higher. The higher rate concerns were the catalyst behind the market sell-off that day.
Stocks picked up some of the losses on Monday, but then hawkish rhetoric out of various Federal Reserve governors the following day, resulted in another steep loss on Tuesday. Wednesday and Thursday’s economic reports were weaker than anticipated, helping push equity markets sharply higher on Thursday. In this case, perceived economic weakness was associated with the possibility that the Federal Reserve may not be as pro-active in moving interest rates higher.
Friday was another weak day for the markets, but the steep decline in oil prices was more likely the culprit in this case. Despite all the daily volatility we continue to believe that fundamentally, not much has changed concerning the state of the economy and the likely timing of Federal Reserve action. For the week, the S&P 500 lost 0.83%. So far on a year-to-date basis the S&P has lost a meager 0.27% amid the heightened volatility.
Amid the heightened stock volatility, the 10-year Treasury Bond yield declined. After spiking higher last week to 2.24%, the long bond closed at 2.11%.
More data concerning housing and manufacturing is due next week, but most important will be the announcement from the Federal Reserve concerning their outlook for the economy. Fed watchers will be looking to see if the word “patient” is dropped from the announcement as it pertains to how long they will wait before increasing short-term interest rates. While fundamentally, we do not think it is particularly important, it will likely move markets in the short-term.
Weekly Market Commentary
March 2nd   – March 6th 
Economic data released over the course of the week continued to suggest the U.S. remains on track for continuing growth. While some of the manufacturing reports painted a slightly different picture on the pace of growth, growth remained evident in all data released over the week. Measures of the service sector component of the economy remained very robust, while employment growth topped of the week’s data on a positive note.
The ADP Employment report released Wednesday showed 212,000 jobs were created during the month of February, while the Bureau of Labor Statistics report on Friday suggested far more robust improvement of 295,000. The unemployment rate moved down to 5.5% from 5.7% in Household Employment Survey. However, the decline was partially attributable to a decline in the labor force participation rate.
Equity markets started the week, with a strong rally, pushing indices to all-time highs. However, the gains slowly evaporated over the course of the weak, culminating with a weak market activity on Friday after the release of the employment data. The stronger than expected number pushed interest rates higher, and stocks lower, as concerns over rising rates soured stock investor enthusiasms. The S&P 500 lost 1.43% on the day, and 1.57% on the week.
The strong labor report lifted 10-Year U.S. Treasury yields which had been slowly rising throughout the week. At Friday’s close, the long bond closed with a yield of 2.24%, 24 basis points above last weeks close.
Weekly Market Commentary
February 23rd  – February 27th 
This week featured several important economic releases, not including Federal Reserve Chairperson Yellen’s report to the Senate Banking Committee. Once again, data was mixed. Four regional manufacturing surveys all came in below expectations for the month of February, though some regions cited weather related difficulties. Existing Home Sales for January also surprised on the down-side, while New Home Sales were slightly above consensus estimates. On the positive side, the PMI Service sector report for February was much stronger than anticipated and the Chicago Fed National Activity index moved strongly higher during the month of January. Chairperson Yellen’s testimony did little to shift investor’s expectations concerning the timing of Federal Reserve rate hikes, which most believe will begin in the early Fall.
Given the stable nature of the domestic data, and relative quiet across the globe, at least from an economic perspective, markets were very quiet. The S&P 500 lost 5 points during the week, closing at 2,105. Ten-Year Treasury yields declined from 2.13% at the week’s open to 2.00%.
Next week’s economic calendar is quite full, culminating in the BLS Employment Report Friday morning. Employment is a key component of future Federal Reserve interest rate policy. Should the strengthening of 2014 continue at a similar pace throughout the first half of 2015, the Federal Reserve will likely have little choice but to embark on a slow path of higher short-term interest rates. Not only will we be watching the job growth number, but hourly earnings, the underemployment rate and labor force participation warrant particular attention in the current environment.
Weekly Market Commentary
February 16th   – February 20th  
On the economic front, much of the data released continued to point in the direction of steady, albeit moderating growth. Two regional and two national surveys concerning manufacturing and production all pointed to steady, yet slower growth than experienced during the middle of 2014. The Housing Market Index and January Housing Starts both revealed slightly slower activity than anticipated, yet not alarmingly so.
Overseas developments were likely to be more impactful on investor’s sentiment over the weak, and that news was equally uneventful. The cease fire set to take place Saturday in the Ukraine failed, with European leaders holding further discussions with Russian President Putin in an attempt to revive the peace plan. Meanwhile, a Greek debt extension plan was quickly rebuffed by German officials, sending the ailing country back to the negotiation table in an effort to strike a deal for another 6-month bailout package. Friday afternoon, reports emerged that an agreement had been reached. The details of the debt pact have yet to be released, but it appears as though the debt extension will be 4 months in length.
After two weeks of steady gains in the stock market, investors took a rare breather for the first few trading days of the week.  The S&P 500 began the week at 2,097 and ended at the same level at the close Thursday. Friday was looking much the same until the news from Europe sparked a modest equity rally. The S&P 500 gained 13 points on the day, or 0.60%.    While more economic data will be released in the coming week, overseas developments are more likely to overshadow the importance of domestic data, for the moment.
Ten-year Treasury yields spiked higher early in the week, moving from 2.02% to 2.15% on the first day of trading. Yields fell through the remainder of the week, but moved back higher after the Greek debt announcement to close at 2.13%.
Weekly Market Commentary
February 9th - February 13th
Amid a data-lite week on the economic front, investors focussed on news abroad.  That news was generally positive.  Greece continued to negotiate with the European Union in order to chart-out a path by which the troubled nation could remain part of the Union, but allow for some relief of the terms set forth in their last "bail-out" package.  European leaders also met with Russian President Vladimir Putin in Minsk, which resulted in a "cease-fire" in the embattled Ukraine scheduled for Friday.  Europe also posted better than expected economic numbers over the week.
After posting strong gains last week, the S&P 500 picked up where it left off, improving throughout the week, and closing near the all-time high.  Ten-year Treasury bonds continued to retreat, with yields climbing back over 2% for the first time since January 7th.
Next week, the economic calendar picks up again and investors will likely continue to focus on overseas developments.
Weekly Market Commentary
February 2nd  – February 6th  
The week featured several key economic data points, culminating with the January Employment Report which was released Friday morning. The economy continued to exhibit signs of steady growth during the month of January. National manufacturing and service sector data continued to show signs of expansion, albeit at a lower level than during the middle of 2014, when growth accelerated strongly.
The first employment report from ADP (Automatic Data Processing) indicated January job growth of 213 thousand, which was modestly below expectations. That was followed up by Weekly Jobless Claims which came in at 278 thousand, continuing a positive trend in reduced filings. Finally, the Friday report from the BLS (Bureau of Labor Statistics) surprised on the upside, revealing the economy generated 257 thousand jobs in January, and revised the December number higher by 77 thousand jobs to 329 thousand. The unemployment rate moved higher, but was the result of an increase in labor force participation. This is a positive development as it indicates that almost 1 million discouraged workers decided to begin looking for employment.
Equity markets moved higher at the open of the week, positing large gains on the first two trading days. Markets softened on Wednesday, but picked back up again throughout the day Thursday. Stocks initially continued the rally after the labor report Friday, but could not hold the gains during the day as a downgrade on Greek Debt from B to B- spooked investors. Still, for the week the S&P 500 gained a healthy 3.0%, closing at 2,055. After 5 trading weeks of heightened volatility, the S&P 500 index is only 4 points below the 2014 year-end close of 2,059.
Bond yields moved sharply higher Friday, capping off a week of slowly rising yields. After closing last week at 1.68%, the Ten-Year Treasury Yield closed this week at 1.94%, with half of the increase coming on Friday.
Economic data will be sparse next week, thus we anticipate market movements will more likely a function on news from overseas.


Weekly Market Commentary

January 26th – January 30th      

Economic data released over the week was somewhat mixed.  On the negative side, December Durable Goods Orders came in well below estimates at -0.8% vs. expectations of a 0.8% improvement.  Weakness was detected across sectors, but was mainly focused in machinery, computers and electronics.  Regional manufacturing surveys for the month of December were mixed with the Dallas Fed report coming in below expectations, while the Richmond Fed report was slightly stronger.  The national Chicago PMI report for the month of January was stronger than anticipated.  Housing continued to show signs of emerging strength with both New and Pending Home Sales for the month of December besting analyst expectations.  The PMI Service sector report for January came in slightly ahead of expectations while Weekly Jobless claims tumbled to 265,000 revealing continued improvement in the employment market.  Finally, Gross Domestic Product (GDP) for the first quarter came in at 2.6%, below the consensus estimate of 3.2%.  While this number is subject to revision, at this point, 2014 GDP came in at 2.4%, vs. 2.2% growth in 2013.  2014 growth was concentrated in the second two quarters which averaged 5% growth.

Corporate earnings reports were generally positive with big positive earnings surprises from Apple and Boeing driving their respective share prices.  Dow Chemical also surprised on the upside.  Midway through the week, the positive earnings reports did little to allay investor sentiment.  Markets registered big losses through the first three trading days, with the S&P 500 falling by 49 points or 2.4%.  However, true to recent form, markets recovered strongly on Thursday, with the S&P 500 gaining 19 points or .95%. 

After the market closed on Thursday, Amazon reported a 15% sales increase, fueling a 7% gain in the after-hours trade.  The optimism for Amazon did not carry over into the broad market as the sub-par GDP report dampened enthusiasm for stocks and pushed investors back to the safety of U.S. Treasuries.  For the week, the S&P 500 lost 2.77%.

Treasury yields continued to fall, with the 10-year Treasury closing the week to yield 1.70%.  The 5-year low for the long bond troughed in June of 2012 at 1.49%.  This was just prior to the Federal Reserve’s hint that quantitative easing would be removed from the system. 


Weekly Market Commentary
January 19th – January 23rd 
The economic calendar was lite this week with very few reports on consequence. Housing provided a positive surprise with Housing Starts rising in January, particularly in the single family component, while Existing home sales registered a similar improvement. Weekly jobless claims remained slightly above $300k.
Investors eagerly awaited the European Central Bank announcement on Thursday, anticipating the initiation of European quantitative easing, but unsure of how aggressive the policy may be.   Equity markets rose modestly through the first three trading days of the week, then when the size of the program was announced ($60 billion Euro’s a month beginning in March and ending in September 2016) investors moved assets into stocks. On the day, the S&P gained 31 points or 1.52%, leaving the index 5 points above the year-end close. The final trading day moved between small gains and losses, but ended on a slightly more sour note, with the S&P 500 losing 11 points or .54% late in the day. For the week, index gained a solid 1.63%.
Now with that major policy decision public, focus will likely return to U.S. corporate earnings, which thus far have been mixed. After getting off to a shaky start, primarily due to some high-profile misses by major financial institutions, reports have generally improved across a broad spectrum of economic sectors. 
As investors moved into money into stocks they were liquidating bonds to provide the cash. Ten-year U.S. Treasury yields, which closed last week at 1.81%, rose to 1.90% at the close Thursday. Money moved back into Treasury Bonds on Friday, pushing the yield back down to 1.82% to end the week.
Along with earnings next week, we will get some additional data on housing, durable goods orders and our first estimate of Q4 2014 GDP.
Weekly Market Commentary
January 12th – January 16th   
After quickly rebounding from an early 2015 sell-off, the second trading week of the year was not kind. Equity markets picked up on last Friday’s weakness and continued a downward trend throughout the first four trading days of the week. 
While economic data was relatively lite, what was released showed economic moderation in December, particularly retail sales data which surprised to the downside.   Inflation reports suggested the drop in oil prices is in fact having downward pressure on inflation, as the data came in lower than anticipated.  Along with the softer retail sales report, earnings reports of several US financial institutions including JP Morgan Chase, Citigroup and Bank of America were weaker than anticipated. Alcoa kicked off the earnings season with a strong report. Intel registered a solid performance as well, but provided a weaker than anticipated fourth quarter outlook.
European headlines also gave cause for concern. The Swiss National Bank shocked investors Wednesday by removing the cap on their currency value relative to the Euro. The Euro fell further on the news, while the Swiss market gave up 8.7% of its value during the day. The Swiss market fell another 5.9% on Thursday. European took the move as a signal the ECB will be announcing significant policy action next week, and rallied accordingly.
U.S. markets stabilized on Friday, for the first two hours the market moved between gains and losses, but the S&P was able to pick up momentum mid-day and close with a gain of healthy gain of 26 points. Amidst the volatility, the index lost only 1.29% during the week.
During the volatility, fixed income yields plummeted. The ten-year US Treasury yield hit a low of 1.78% on Thursday, but closed the week slightly higher at 1.82%. Interestingly, short-term Treasury yields have fallen considerably over the past 6 days, suggesting the “all but certain” rate hikes may be less so certain, given the global uncertainty, and significantly lower inflation data.
Next week investors will be focusing on the ECB policy announcement along with a broader group of earnings reports.


Weekly Market Commentary
January 5th – January 9th     
Investors didn’t ring in the new-year with overwhelming enthusiasm. On the final trading day of 2014 the S&P 500 fell by 21 points or roughly .97%. The first three trading days of 2014 saw the S&P 500 give up an additional 56 points or 2.74%. The continued drop in oil prices along with concerns over the possible outcome of Greek elections toward the end of the month gave cause for investors to take some money off the table. But, the pessimism was short-lived, as the S&P 500 gained 60 points over the next two trading days, leaving the index at 2062.14, just above the year-end level.
Economic data remained constructive over the past two weeks, while aggregate data was a little softer in December; most suggest the US economy remains on a sustainable growth path heading into 2015. Friday’s employment report provided further evidence of continued recovery. Non-farm payrolls increased by 252,000 and the unemployment rate fell to 5.6%. October and November data employment gains were also revised higher. Despite the good news, there was some weakness in the report. Average hourly earnings growth declined to 1.7% year-over-year and the labor force participation rate fell by .2%.
Investors initially cheered the employment data, erasing early pre-open losses and posting gains at the market open.  The gains quickly dissipated and equities finished the day down, partially due to the finer details in the employment report.   
Also, the decline in the markets Friday emerged around the same time news broke out of Paris concerning not only the jihadists who massacred employees at the Charlie Hebdo offices, but also a new attack at a grocery store outside of Paris. This marks possibly the third militant jihadist attack in Paris of the week, including the murder of a Paris police officer. Two suspects in this murder were named early Friday morning, though they have not yet been officially linked to the recent string of jihadist activity.  The S&P lost 17 points on the day. Long-term fixed income yields hovered around 2%, with the 10-year Treasury yield closing the week at 1.96%. 
The early story in 2015 looks similar to the latter half of 2014. With equity markets trading in a generally fair value range, we should anticipate further volatility in equity markets as headline risk presents trading rationale.


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