Presented by Mark Gallagher

General market news
• After hitting a recent low of 2.16 percent a little more than a week ago, the 10-year Treasury yield seems to be testing the 2.30-percent level again, but this time as a short-term ceiling. The 10-year was essentially flat last week, but the 30-year did move some, testing the 3-percent level after dropping as low as 2.82 percent the week before.
• A strong week of earnings and favorable reaction to the first round of the French election boosted global markets. The technology, health care, and consumer discretionary sectors led the way, with a number of big players in those spaces reporting positive earnings, including Amazon, Alphabet Inc., AstraZeneca, Bristol-Myers Squibb, and Amgen. In France, centrist Emmanuel Macron advanced to the final round of the presidential election, coming in ahead of Marine Le Pen.
• Last week began with a positive surprise from new home sales, which were expected to decline slightly to 588,000 in March but instead rose to 621,000. This uptick puts sales near post-recession highs and indicates that housing demand remains strong. Later in the week, durable goods orders increased by less than expected, though business investment remained healthy for the first quarter. To end the week, the first estimate of first-quarter GDP growth came in at 0.7 percent, as decelerating consumption and inventory buildup created a drag on the economy. Although the headline figure was disappointing, weather effects likely played a large part in slowing growth.

Source: Bloomberg

Source: Morningstar Direct

What to look forward to
The week is a busy one for economic news. On Monday, the personal income report for March is expected to show growth of 0.3 percent over February. (In February, incomes grew 0.4 percent.) This is a healthy level. Personal spending is also expected to improve, increasing to 0.2-percent growth in March, from 0.1 percent in February. Although this is low, it is helped by the fact that inflation is also low. If these reports come in as expected, they should support continued economic growth.

On Tuesday, the manufacturing sector will report its confidence level, which is expected to drop slightly from 57.2 in March to a still healthy 56.5. Numbers above 50 indicate expansion. The service sector will report on Wednesday; numbers there are expected to improve from 55.2 to 56.0, which again would signal a healthy outlook.

On Thursday, we expect to see that the international trade balance has worsened slightly, from a deficit of $43.6 billion in February to $45.2 billion in March. Despite this, the balance is not out of the ordinary and simply reflects a decline in industrial exports.

Finally, and most important, the jobs report will be released on Friday. It is expected to show significantly faster job growth, rising from 98,000 in March to 193,000 in April due to the arrival of warmer temperatures. Wage growth should also rise slightly, from 0.2 percent to 0.3 percent. If the data comes in as expected, this will reduce concerns about last month’s performance.

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®

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.

Source: Bloomberg

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®

Presented by Mark Gallagher

General market news
• The yield on the 10-year Treasury opened at 2.20 percent Monday morning, its lowest level since last November. It took roughly three days for the 10-year to move from 1.82 percent to 2.20 percent following the election on November 7; as rates currently have momentum, we could see the 10-year move to 2 percent or even lower in the near future. The 30-year Treasury yield opened Monday at 2.89 percent, and the 2-year was back to 1.19 percent after touching a recent high of 1.37 percent.
• All three major indices lost ground last week. The Nasdaq led the move downward, falling 1.29 percent, while the S&P 500 and Dow Jones Industrial Average declined 1.18 percent and 0.99 percent, respectively. Rising geopolitical tensions, which included continued talk of U.S. action in Syria, the U.S.’s dropping of the largest non-nuclear bomb in Afghanistan, and China’s deployment of troops along its border with North Korea, contributed to the decline. In addition, in a Wall Street Journal interview, President Trump seemingly reversed some of his campaign statements—mainly, that he would no longer label China a currency manipulator; that NATO is not obsolete, as it is contributing to the fight against; and that he would possibly nominate Federal Reserve Chair Janet Yellen to a second term—and markets took notice. Financials and technology led the sell-off last week, while consumer staples, utilities, and real estate were the top performers.
• Last week’s economic data was slightly disappointing. The Jobless Claims report was unchanged and remains near historic lows. This is an encouraging sign for the U.S. jobs market following poor data released the week before. Both the Consumer Price Index and retail sales data came in below expectations. Although the inflation data was weaker than expected, the report is not likely to alter the odds of a rate hike in June, as weather largely affected the outcome. The poor retail data indicates that, although consumer confidence remains near multi-decade highs, this confidence hasn’t yet translated into consumer spending.

Source: Bloomberg

Source: Morningstar Direct

What to look forward to
Data surrounding the housing industry will be the main focus this week. On Monday, the National Association of Home Builders Housing Market Index, an important gauge of home builder confidence, will be released. It is expected to remain near its current high levels.

This announcement will be followed on Tuesday by the release of Housing Starts and Building Permits data; both measures directly affect the future supply of housing stock.

Finally, Existing Home Sales data will be released on Friday. This figure is expected to rebound from a surprise decline last month that was caused primarily by a lack of supply.

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®

Presented by Mark Gallagher                              

General market news

• The 10-year Treasury yield opened this week at 2.38 percent, well below its mid-March highs of more than 2.60 percent. The 30-year yield also remains low, opening at 3.01 percent this Monday morning.
• The market pain from last week’s defeat of the American Health Care Act didn’t linger long. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average were all up, as investors appeared to turn their focus to the president’s tax reform plan. The more technology-oriented Nasdaq Composite Index led the way, posting a gain of 1.45 percent, as tech stocks returned 1.1 percent on the week.
• In other news, the United Kingdom triggered Article 50 on Wednesday, beginning its exit from the European Union; WTI crude oil recovered to $50 per barrel; and consumer confidence hit its highest level since December 2000, despite just a 0.1-percent increase in consumer spending. Leading sectors included energy, consumer discretionary, and materials. Utilities, telecom, and consumer staples were among those that lagged.
• Economic data released last week was mostly positive. The major news was an upward revision to gross domestic product growth for the fourth quarter of 2016, from 1.9 percent to 2.1 percent. Coming in at the higher end of estimates, this figure was largely driven by an increase in personal consumption. In that vein, personal income for February grew in line with estimates. Finally, initial jobless claims decreased, remaining near historically low levels.

Source: Bloomberg

Source: Morningstar Direct
What to look forward to
Several widely tracked economic data points will be released this week. On Monday, the ISM Manufacturing Index is expected to remain in expansionary territory.

On Wednesday, the March meeting minutes of the Federal Open Market Committee will be released. This document should shed further light on the thinking behind the March rate hike and the future path of Federal Reserve policy.

The week will end with the release of the Employment Report for March.

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®