January 17th – Weekly Update

  • It was a relatively flat week for U.S. equity markets following the post-election rally. The key tailwinds for stocks remain the reflation theme, positioning and better economic data. The 10-year U.S. Treasury yield closed at approximately 2.39%. Oil was flat and gold was slightly up as investors shift their attention toward earnings season.
  • According to FactSet, the fourth quarter blended earnings growth rate for the S&P 500 is 3.2%. 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. Pacific Continental, Valeant and Brookdale Senior Living impressed this week; Ethan Allen, Kohl’s and Macy’s were among the disappointments.
  • Corporate tax reform and the repealing of Obamacare dominated a slew of political headlines during the period as the presidential inauguration approaches. President-elect Donald Trump gave his first press conference since July 2016 and pushed back against unverified allegations that Russian officials have gathered compromising information on him, as reported by BuzzFeed and CNN.
  • The National Federation of Independent Business (NFIB) Index of Small Business Optimism jumped to 105.8 in December from 98.4 in November. This was ahead of the 99.6 consensus and marked the biggest monthly increase on record and the highest level since 2004.
  • The report further noted that there is also evidence that higher small business optimism is leading to increased business activity, including capital investment. Last month, the NFIB said that small business optimism soared after the election on expectations that tax and regulatory headwinds will all be addressed.
  • The Job Opening and Labor Turnover Survey (JOLTS) reported 5.52 million U.S. job openings in November, a slight rise from October’s 5.45 million.
  • In the week ended January 6, 2017, the Mortgage Bankers Association stated that U.S. mortgage applications rose 5.8 percent during the period.
  • According to the Sentix, euro zone economic sentiment reached its highest level since 2015, rising to 18.2 in January from December’s reading of 10. Unemployment came in at 9.8% in November, compared to 10.5% a year prior.

CPWM Weekly Market Monitor (2017.01.17)