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Weekly Market Snapshot

October 20, 2017

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

The economic calendar was relatively minor and not market-moving. The Beige Book continued to describe growth across the 12 Federal Reserve districts as “modest to moderate.” The job market continued to tighten, limiting the pace of growth in some areas, although wage pressures were described as “only modest to moderate.” The Index of Leading Economic Indicators fell in September, but that was due to temporary hurricane effects (an increase in jobless claims, a shorter factory workweek, and a decrease in building permits). Industrial production rose 0.3% in September, but previous figures were revised lower, leaving factory output down at a 2.1% annual rate in 3Q17 (a contrast to the strong ISM manufacturing survey results).

By a vote of 51-49, the Senate approved a budget plan for FY18, paving the way for tax cuts. The plan calls for unspecified cuts to spending over the next 10 years.

Next week, earnings reports should continue to drive the stock market action, but Friday’s GDP report is the clear highlight on the economic calendar. This is the advance estimate. Figures will be revised. Consumer spending growth had been on a soft track, but September’s pop in vehicle sales (clearance promotions) should keep it at a moderately strong pace. Growth in business fixed investment is likely to be restrained by Hurricane Harvey (which thwarted the recovery in energy exploration). Residential homebuilding is likely to be soft, with some impact from the hurricanes. The hurricanes may also influence the change in inventories and net exports. Investors should also be on the lookout for Trump’s decision on the Fed chair.


Indices

  Last Last Week YTD return %
DJIA 23163.04 22841.01 17.21%
NASDAQ 6605.07 6591.51 22.70%
S&P 500 2562.10 2550.93 14.44%
MSCI EAFE 2005.96 1995.67 19.12%
Russell 2000 1502.04 1505.16 10.68%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.25 3.50
Fed Funds 1.17 0.40
30-year mortgage 3.96 3.54

Currencies

  Last 1 year ago
Dollars per British Pound 1.316 1.225
Dollars per Euro 1.185 1.093
Japanese Yen per Dollar 112.54 103.95
Canadian Dollars per Dollar 1.249 1.323
Mexican Peso per Dollar 18.805 18.621

Commodities

  Last 1 year ago
Crude Oil 51.29 50.43
Gold 1290.00 1267.50

Bond Rates

  Last 1 month ago
2-year treasury 1.56 1.43
10-year treasury 2.35 2.25
10-year municipal (TEY) 2.98 2.98

Treasury Yield Curve – 10/20/2017


As of close of business 10/19/2017


S&P Sector Performance (YTD) – 10/20/2017



As of close of business 10/19/2017


Economic Calendar

October 25  —  Durable Goods Orders (September)
 —  New Home Sales (September)
October 26  —  Jobless Claims (week ending October 21)
 —  Advance Economic Indicators (September)
 —  Pending Home Sales Index (September)
October 27  —  Real GDP (3Q17, advance estimate)
October 31  —  CB Consumer Confidence (October)

 

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 October 19, 2017.


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