Early McClintic & McMillan
Early McClintic & McMillan

Weekly Market Snapshot

December 15, 2017

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

As expected, the Fed raised short-term interest rates for the third time in 2017 (market participants were more focused on the progress of tax legislation). The dots in the dot plot did not shift much from where they were in September and were all over the place for the end of 2018 and 2019 - meaning that there is no clear consensus on the pace of policy action (and bear in mind that personnel changes mean that many of these dots will be replaced in 2018).

The economic data reports were consistent with moderate growth in the near term. Retail sales results for November were stronger than expected, with upward revisions to September and October. Industrial production posted a lackluster gain. Inflation reports showed some pressure in energy and moderate core inflation, with some pipeline pressure in commodities.

Next week, the financial markets are expected to show little interest in the economic data reports (the focus will remain on the tax bill). Housing figures (sales and construction activity) aren’t all that critical in November and seasonal adjustment can exaggerate minor weather effects. The estimate of 3Q17 GDP growth is expected to be little change from the previous assessment (and the story isn’t going to change). Durable goods orders and personal spending data will help to fill in the picture on 4Q17 GDP growth.


Indices

  Last Last Week YTD return %
DJIA 24508.66 24272.35 24.02%
NASDAQ 6856.53 6873.97 27.37%
S&P 500 2652.01 2647.58 18.46%
MSCI EAFE 2016.52 2020.13 19.75%
Russell 2000 1506.95 1544.14 11.04%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.50 3.50
Fed Funds 1.16 0.66
30-year mortgage 3.97 4.38

Currencies

  Last 1 year ago
Dollars per British Pound 1.343 1.242
Dollars per Euro 1.178 1.041
Japanese Yen per Dollar 112.39 118.18
Canadian Dollars per Dollar 1.280 1.334
Mexican Peso per Dollar 19.138 20.333

Commodities

  Last 1 year ago
Crude Oil 57.04 50.90
Gold 1257.1 1129.80

Bond Rates

  Last 1 month ago
2-year treasury 1.82 1.72
10-year treasury 2.35 2.37
10-year municipal (TEY) 3.11 3.12

Treasury Yield Curve – 12/15/2017

Chart

As of close of business 12/14/2017


S&P Sector Performance (YTD) – 12/15/2017


Chart

As of close of business 12/14/2017


Economic Calendar

December 18  —  Homebuilder Sentiment (December)
December 19  —  Building Permits, Housing Starts (November)
December 20  —  Existing Home Sales (November)
December 21  —  Jobless Claims (week ending December 16)
 —  Real GDP (3Q17, 3rd estimate)
December 22  —  Durable Goods Orders (November)
 —  Personal Income and Spending (November)
 —  New Home Sales (November)
 —  UM Consumer Sentiment (December)
December 25  —  Christmas Holiday (markets closed)
January 1  —  New Year's Holiday (markets closed)
January 5  —  Employment Report (December)

 

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 December 14, 2017.