Weekly Market Snapshot

May 26, 2017

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

The economic data were not especially market-moving. The estimate of first quarter GDP growth was revised to a 1.2% annual rate (from +0.7%), higher than expected (but well within the usual range of noise in these data). Consumer spending was revised higher (still slow). Business fixed investment was revised to an even stronger pace – however, the soft report on durable goods orders suggests that such strength may be fleeting. Home sales figures for April were on the soft side of expectations, reflecting some seasonal shift (due to earlier mild weather and the late Easter) and the usual statistical noise. The University of Michigan’s Consumer Sentiment Index was little changed in May, near the average of the last five months – however, the report noted that most Republicans are expecting robust economic growth, while most Democrats are anticipating a recession. 

President Trump was out of the country. The White House’s Office of Management and Budget unveiled its budget proposal (more of a wish list, as Congress writes the laws), which had some notable arithmetic errors (double-counting some $2 trillion in tax revenues). 

Up next, there are important economic reports in the holiday-shortened week. While the Fed isn’t going to react to any one piece of economic data, the May employment report is seen as the last major hurdle ahead of the Fed’s June 13-14 policy meeting (current market odds of a 25-bp hike in June are at 80%). The markets could react to surprises in the ISM manufacturing survey or in the consumer confidence data, but a lot of weight falls on the May job market figures. Nonfarm payrolls are expected to have risen moderately, with the unemployment rate likely steady (at 4.4%).


Indices

  Last Last Week YTD return %
DJIA 21082.95 2663.02 6.68%
NASDAQ 6205.26 6055.13 15.27%
S&P 500 2415.07 2365.72 7.87%
MSCI EAFE 1892.43 1868.75 12.38%
Russell 2000 1383.39 1361.08 1.93%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.00 3.50
Fed Funds 0.91 0.37
30-year mortgage 4.03 3.72

Currencies

  Last 1 year ago
Dollars per British Pound 1.294 1.467
Dollars per Euro 1.121 1.119
Japanese Yen per Dollar 111.84 109.76
Canadian Dollars per Dollar 1.121 1.119
Mexican Peso per Dollar 18.503 18.454

Commodities

  Last 1 year ago
Crude Oil 49.90 49.48
Gold 1259.80 1222.70

Bond Rates

  Last 1 month ago
2-year treasury 1.29 1.28
10-year treasury 2.23 2.25
10-year municipal (TEY) 3.02 3.32

Treasury Yield Curve – 05/26/2017


As of close of business 05/25/2017


S&P Sector Performance (YTD) – 05/26/2017



As of close of business 05/25/2017


Economic Calendar

May 29  —  Memorial Day (markets closed)
May 30  —  Personal Income and Spending (April)
 —  CB Consumer Confidence (May)
May 31  —  Chicago Purchasing Managers Index (May)
 —  Pending Home Sales Index (April)
 —  Fed Beige Book
June 1  —  ADP Payroll Estimate (May)
 —  Jobless Claims (week ending May 27)
 —  ISM Manufacturing Index (May)
 —  Motor Vehicle Sales (May)
June 2  —  Employment Report (May)
 —  Trade Balance (April)
June 14  —  FOMC Policy Decision (Yellen press conference)
July 4  —  Independence Day holiday (markets closed)
July 7  —  Employment Report (June)
July 26  —  FOMC Policy Decision (no Yellen press conference)
September 20  —  FOMC Policy Decision (Yellen press conference)

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business May 25, 2017.

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