January 23rd – Weekly Update

  • Major U.S. equity indexes dipped during inauguration week with the S&P 500, Dow Jones and Nasdaq each posting a slight loss. Oil was also down, gold finished higher. The 10-year U.S. Treasury yield closed at approximately 2.47%.
  • With 12% of S&P 500 companies having reported fourth quarter results, 61% have beaten earnings expectations while 47% have beaten sales expectations. According to FactSet, the fourth quarter blended earnings growth rate for the S&P 500 is 3.4%. 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. CoLucid Pharmaceuticals, Clayton Williams Energy and Netflix impressed this week; Rent-A-Center, Pearson PLC and Target were among the disappointments.
  • President Donald Trump delivered his inauguration speech and largely echoed the populist approach from his campaign, repeating intentions to bring power back to the people. He touched on his infrastructure pledges and said he would work to protect the borders.
  • Federal Reserve Chair Janet Yellen delivered a speech during the period stating that the U.S. economy is close to the FOMC’s goals of maximum employment and price stability. She noted the future path of interest rates will depend on how the economy actually evolves over coming months. However, she reiterated that she and most of the committee expect a few rate hikes a year until the fed funds rate is close to the Fed’s estimate of its longer-run neutral rate of 3%, which would occur by the end of 2019.
  • Initial U.S. jobless claims fell to 234K, below the 254K consensus and compared to last week’s 249K level. The four-week moving average fell to 247K, the lowest since November 1973.
  • December housing starts rose 11.3% month-to-month and 5.7% year-over-year to a 1.226M seasonally adjusted rate (saar), better than the 1.187M consensus estimate.
  • December building permits came in below expectations at a 1.21M saar, down 0.2% month-to-month and 0.7% higher year-over-year. Consensus was looking for a 1.225M pace. Multi-family permits dropped 10.1%, while single-family permits were up 4.7%.

CPWM Weekly Market Monitor (2017.01.23)