Market Commentary, 07/17/17
All three major indexes were up last week, with the tech-heavy Nasdaq leading the way with a 2.59% increase. The S&P closed at 2,459 for a weekly increase of 1.41% and the Dow added over 223 points to close at 21,637, a 1.04% gain.
Initial unemployment numbers fell to 247,000 for the week, to remain well below the “healthy” jobs market threshold of 300,000 for the 123rd consecutive week. Likewise, the number of people already receiving benefits ended the week at 1.95 million, under the 2 million “healthy” mark for the 14th week. Additionally, the May employment report was released, revealing the number of available jobs fell over 300,000 for the month, to close at 5.66 million. Overall the unemployment numbers and the employment report point to a strong labor market in which companies are hiring, layoffs remain near decade lows, and most people who want a job are able to find one.
The Federal Reserve said that a shortage of qualified workers in the U.S. has “limited” hiring but that companies don’t appear to be raising wages to attract job-seekers. The remarks came from the Federal Reserve’s Beige Book, its regular survey of business conditions around the country. The report said economic growth was “slight to moderate” from late May through June. The ultra-tight labor market, that is more jobs than workers, with unemployment near a 16-year low of 4.4% was cited as a reason for slower growth. With wages rising only modestly, some senior Fed officials believe inflation is likely to remain on the low side for a longer period than the Fed now predicts. The weak inflation data gives the Fed more latitude, increasing the possibility of another interest rate hike.
Despite record profits in the 2nd quarter, the three largest US banks (JP Morgan Chase, Wells Fargo and Citigroup) cut their projections for lending growth in 2017. This reduction of lending expectations is due to the uncertainty surrounding policy changes that could benefit banks, including the tax-code overhaul and infrastructure spending. More specifically long-term yields are staying relatively low despite the short-term rate increases by the Fed. This combination weighs on bank profits because it narrows the difference in short and long term rates. This flattening of the yield curve is seen as a negative sign for economic growth.
Amid mixed economic news, both the Dow and S&P 500 closed Friday at all time-highs and we continue to see a slow and steady market rise. The stock market this week will likely be influenced by the 65 companies that are reporting earnings, including Microsoft, IBM, Johnson and Johnson, and Netflix.
Jeremiah Patterson, CFP®
Copelin Financial Advisors
514 Brooks Street
Sugar Land, TX 77478
Phone: 281 240-2902
Fax: 281 240-2856
Advisory Services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc., a Registered Broker/Dealer and Member of FINRA & SIPC. Copelin Financial Advisors, Inc. is independent of ProEquities, Inc.
Source – W E Sherman & Co., LLC