Presented by Mark Gallagher
General market news
• The 10-year Treasury opened Monday morning at 2.13 percent, up from a low of 2.08 percent last week, which was its lowest level since November 10, 2016. The 30-year yield opened at 2.75 percent Monday, up from 2.68 percent last week. The 30-year last touched 2.71 percent back in June and is only about 15 basis points above where it stood on November 7.
• Despite both Hurricane Harvey and increasing political tension with North Korea, U.S. markets were up for the second straight week. Tax reform returned to focus, and mergers and acquisitions within health care helped push markets higher. The Nasdaq Composite led the way, increasing by 2.73 percent, following the news that biotech giant Gilead Sciences had proposed a deal to acquire Kite Pharma for almost $12 billion.
• The S&P 500 and Dow Jones Industrial Average were also up, posting gains of 1.43 percent and 0.88 percent, respectively. The market continued to shrug off tensions in international relations and focused on news of improved growth—namely, that U.S. growth for the second quarter was revised up to a 3-percent annual pace, according to a report from the Bureau of Economic Analysis. In addition to health care, technology and materials were the best-performing sectors last week; however, bond proxies, such as telecom and utilities, lagged.
• There were three major data releases last week, and they all pointed toward continued growth. On Thursday, the personal income and outlays data was released. Both had strong results, with income rising 0.4 percent month-over-month against expectations of a 0.3-percent increase. Spending rose 0.3 percent against expectations of a 0.4-percent increase. Both of these figures are quite healthy, and continued growth at these levels could bolster growth for the rest of the year.
• On Friday, the August employment report came in as a mixed bag, with only 156,000 new jobs added against expectations for 180,000 new jobs. The underlying data was also disappointing, with wage growth slowing down and average hours worked decreasing slightly. The slowed hiring pace may be due either to a lack of demand (new jobs) or supply (qualified workers).
• Finally, the Institute for Supply Management Manufacturing Index handily beat expectations by increasing to 58.8, against expectations for only 56.5. This represents the highest reading since April 2011 and shows that manufacturers are optimistic about their prospects going forward.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | 1.43% | 0.20% | 12.16% | 16.47% |
| Nasdaq Composite | 2.73% | 0.10% | 20.52% | 24.63% |
| DJIA | 0.88% | 0.18% | 13.21% | 22.38% |
| MSCI EAFE | 0.58% | 0.40% | 18.00% | 18.12% |
| MSCI Emerging Markets | 0.65% | 0.34% | 29.03% | 25.73% |
| Russell 2000 | 2.66% | 0.59% | 5.04% | 15.58% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | –0.18% | 3.45% | 0.46% |
| U.S. Treasury | –0.22% | 2.92% | –1.00% |
| U.S. Mortgages | –0.11% | 2.44% | 0.75% |
| Municipal Bond | –0.02% | 5.18% | 1.05% |
Source: Morningstar Direct
What to look forward to
After a busy week last week, this week will be lighter on the economic news front. We expect only two major releases.
First, durable goods orders data will be released on Tuesday. After a sharp dive in the headline measure in August due to a drop in aircraft orders, this proxy for business confidence is expected to rebound. The core figure strips out transportation equipment, and it is expected to grow modestly as well.
On Wednesday, the Institute for Supply Management will release its nonmanufacturing index. This measure of confidence for the service side of the economy is also expected to increase. Given the strength in manufacturing confidence, any increase in this measure would be considered validation of today’s continuing economic strength.
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®