February 20th – Weekly Update

  • It was a strong week for U.S. equities with the Nasdaq, Dow Jones and S&P 500 all experiencing gains and the latter two breaking records. Oil prices dipped and gold was slightly up. The 10-year U.S. Treasury yield closed at approximately 2.42%.
  • With 82% of S&P 500 companies having reported fourth quarter results, 66% have beaten earnings expectations while 53% have beaten sales expectations. According to FactSet, the fourth quarter blended earnings growth rate for the S&P 500 is 4.6%. If the index reports earnings growth for the quarter, it will mark the first time the index has recorded year-over-year earnings growth for two consecutive quarters since Q4 2014 and Q1 2015. Groupon, Procter & Gamble and Southwest airlines impressed this week; Avis, Dean Foods and GNC were among the disappointments.
  • Federal Reserve Chair Janet Yellen said that incoming data suggests labor market conditions continue to tighten and inflation may move up to 2%, consistent with their expectations. She added that the Fed will evaluate whether employment and inflation are continuing to evolve in line with these expectations at upcoming meetings.
  • Atlanta Fed President Dennis Lockhart said there is no urgent need for the Fed to hike rates as it evaluates how the Trump administration’s policies impact the economy. He said he was agnostic about whether the economy would likely warrant two or three rate hikes this year, but that in either case he didn’t really see a compelling reason to move ahead in March.
  • President Donald Trump spoke about tax reform again during the period. He said that a “massive tax plan” would be unveiled in the “not-too-distant future”. He added that his plan would lower rates “substantially” for individuals and businesses. However, details are yet to be released.
  • Initial jobless claims remained impressive, coming in at 239K in the latest week. This compares to the prior week of 234K, and better than the 245K consensus estimate. It is the sixth week out of the past seven coming in below 250K.
  • The NFIB small business index rose to 105.9 in January from 105.8 in December, the highest level since December 2004.

CPWM Weekly Market Monitor (2017.02.20)