Presented by Mark Gallagher
General market news
• The 10-year Treasury yield opened at 2.30 percent early this Monday morning, its highest level in more than a week. Much of this increase is due to the market reaction following the first round of the French presidential election. The 30-year yield had a similar response, opening the week at 2.95 percent.
• Positive earnings surprises and news of a tax-cut plan from the Trump administration helped push markets higher last week. Though it’s still very early in the season, eight of the eleven Russell 3000 companies reporting so far, including Constellation Brands, Red Hat, and CarMax, have posted earnings higher than initial estimates.
• Geopolitical tensions remained high last week, with North Korea issuing threats toward the U.S. Other developing political stories included British Prime Minister Theresa May’s call for a “snap election” in June, which could increase her Conservative Party majority, and the first round of the French election.
• Industrials, consumer discretionary, and technology were among the top-performing sectors for the week, with Facebook, Microsoft, and Alphabet all posting returns greater than 2 percent. The worst-performing sectors included energy and telecom, as oil prices came down from the highs of the previous week.
• Last week’s economic data focused on housing. The National Association of Home Builders Housing Market Index declined slightly; however, this gauge of builder confidence remains at a healthy level. Housing starts also dropped more than expected, but building permits increased more than anticipated. To end the week, existing home sales beat expectations, recovering from a slight slowdown last month. Although the data was mixed, the high levels of builder confidence and sales bode well for the housing market’s future strength.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | 0.87% | –0.49% | 5.54% | 14.70% |
| Nasdaq Composite | 1.82% | 0.01% | 10.15% | 21.03% |
| DJIA | 0.51% | –0.45% | 4.71% | 17.25% |
| MSCI EAFE | 0.23% | –0.48% | 6.87% | 7.27% |
| MSCI Emerging Markets | 0.17% | 0.47% | 11.97% | 15.70% |
| Russell 2000 | 2.58% | –0.40% | 2.05% | 23.23% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | 0.93% | 1.75% | 1.39% |
| U.S. Treasury | 0.96% | 1.64% | 0.01% |
| U.S. Mortgages | 0.73% | 1.21% | 1.01% |
| Municipal Bond | 1.10% | 2.69% | 0.71% |
Source: Morningstar Direct
What to look forward to
Although we may see slowing growth in a few key figures released this week, the economic picture remains positive.
Housing demand has been strong—in large part because prices are affordable—and that should continue. New home sales data from March will be reported on Tuesday. Expectations are for 588,000 sales—a slight decrease from February. Good weather and a lack of existing home supply could allow this number to come in even higher.
Consumers are feeling good about things as well. Although the Conference Board’s Consumer Confidence Survey is expected to drop slightly—from 125.6 to 123.7—it would remain near a 16-year high. Good labor market conditions, low gas prices, and recent stock market performance have supported consumers’ confidence in the current environment.
On Thursday, the durable goods orders report will give us a look at business demand. Headline orders have been supported by continued strength in commercial aircraft orders. And although orders are expected to drop from 1.8 percent to 1.5 percent, this would still demonstrate relatively strong growth overall. Core orders, which exclude transportation, are expected to come in at 0.5 percent for the second month in a row. Both of these numbers, combined with the previous two months, would indicate strong business investment in the first quarter—a positive sign going forward.
Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.
Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.
Authored by the Investment Research team at Commonwealth Financial Network.
© 2017 Commonwealth Financial Network®