May 15th – Weekly Update

  • U.S. equities along with gold experienced a flat week as oil bumped up. The 10-year U.S. Treasury yield closed at approximately 2.33%. Oil finished the week higher after a choppy ride. This came despite a headline from Reuters suggesting that both OPEC (Organization of the Petroleum Exporting Countries) and allied non-OPEC sources are considering extending their production-cut agreement an additional nine months when they meet on May 25 – a six- month extension was previously anticipated.
  • Independent centrist Emmanuel Macron won France’s presidential election, defeating far-right National Front candidate Marine LePen. While Macron’s win has been viewed as the most favorable outcome for France and the Eurozone outlook, market reaction was fairly muted given that the result was widely expected.
  • While Washington is garnering headlines with regards to healthcare and the legislative agenda, earnings season for Q1 is winding down and with 90% of the S&P 500 companies reporting, earnings growth is 14.5%, the best since the third quarter of 2011.
  • A rebound in retail sales and a leap in consumer sentiment, as measured by the University of Michigan confidence gauge, and a 28-year low in initial jobless claims bolsters the case for a pickup in GDP in Q2. The Fed’s job openings and labor turnover survey (JOLTS) showed job openings slightly higher, edging up to 5.743 million to hit its highest mark since July 2016. The hire and quits rates remained unchanged.
  • Though inflation ticked up in April the 0.1% increase in Core CPI was lighter than expected, justifying the case for gradual rate increases. On the other hand, Kansas City Federal Reserve President Esther George commented that the 4.4% unemployment rate is already below the Federal Open Market Committee’s median estimate of long-run unemployment, and that overshooting poses a risk to the sustainability of the current economic expansion.
  • The National Federation of Independent Business (NFIB) small-business optimism index ticked slightly lower in April, coming in at 104.5 vs March’s 104.7 reading. The release noted the index posted its sixth consecutive month of historically high optimism, a streak not seen since 1983.

CPWM Weekly Market Monitor (2017.05.15)