Market Summary
from Briefing.comIndustry Watch
Strong: Financials, Technology, Consumer Discretionary, Industrials
Weak: Telecom Services, Consumer Staples, Utilities, Energy, Materials
- December Nonfarm Payrolls below expectations (156,000; Briefing.com consensus 175,000), but November reading revised up to 204,000 from 178,000
- Dollar Index rebounds after two days of losses
[BRIEFING.COM] The stock market closed the week on a higher note, with the S&P 500 and the Nasdaq finishing Friday's session higher by 0.4% and 0.6%, respectively. The Dow (+0.3%) finished the day 34 points shy of the elusive 20k mark after coming within one point of the milestone early Friday afternoon.
Equity indices started the day flat after the December Employment Situation report was met with a muted reaction from investors. The stock market picked up the pace about an hour into the session, trending upwards to a record intraday high where it remained until the closing bell.
Friday's release of the December Employment Situation report alluded to the fact that the labor market is approaching full employment; job growth is slowing, while wages are ticking up. Time will tell if the Fed sticks to their proposed rate-hike schedule, which calls for three rate hikes in 2017, but the Employment Situation report certainly didn't reveal anything that would suggest a change of plans.
Today's rally was led by the technology sector (+1.0%), which was aided by chipmakers and large cap components. For instance, Apple (AAPL 117.91, +1.30), Microsoft (MSFT 62.84, +0.54), Facebook (FB 123.41, +2.74), Alphabet (GOOGL 825.21, +12.19), and Visa (V 82.21, +1.12) all added between 0.9% and 2.3%, while the PHLX Semiconductor Index finished higher by 0.8%.
Cyclical sectors did slightly better than their defensive counterparts, with three of the six growth-sensitive sectors beating the benchmark index. Utilities (+0.3%) and health care (+0.3%) were the only non-cyclical sectors to perform in line with the broader market. Health care capitalized on the biotech industry's solid showing, evidenced by the 0.9% increase in the iShares Nasdaq Biotechnology ETF (IBB 280.65, +2.54). Telecom services (-2.7%) and real estate (unch) were the only sectors to finish in the red.
Standings for the week look much the same as ten out of eleven sectors finished the week higher, with telecom services (-1.2%) bucking the trend. The week's top performer was health care (+2.9%), followed closely by real estate (+2.2%), technology (+2.4%), and consumer discretionary (+2.3%). The consumer discretionary sector's gain was particularly impressive as the sector had to overcome a poor week from retailers. The SPDR S&P 500 Retail ETF (XRT 43.76, -0.26) finished the first week of 2017 lower by 0.7% after some of its components reported disappointing holiday sales.
Conversely, small caps ended the week on a down note as the Russell 2000 fell 0.4% in Friday's session. On the week, the small-cap index added 0.7%, but underperformed relative to the S&P 500's and the Nasdaq's respective, 1.7% and 2.6% week-to-date gains. Given that the domestically-focused Russell 2000 set the pace for the post-election rally, investors may be concerned about the index's recent struggle.
The Treasury market saw stepped-up selling pressure after the 8:30 ET release of the Employment Situation report for December, but cooled off afterwards. The 10-yr yield closed the day seven basis points higher at 2.42%.
Reviewing today's economic data:
The stock market enjoyed an upbeat start to 2017, as the S&P 500 gained 1.7% during the abbreviated first week of the year. The Nasdaq Composite (+2.6%) outperformed while the Dow Jones Industrial Average (+1.0%) lagged.
The first two sessions of the week featured a steady advance, which placed the S&P 500 just below its record high from December. The two days of gains were followed by an intraday pullback on Thursday, but the brief slip became a distant memory by day's end. However, it is worth noting that the weak spell was brought on by cautious guidance from Kohl's (KSS) and Macy's (M). The two names registered respective losses of 19.0% and 13.9%, while most other apparel names also struggled. Conversely, a daylong rally in Amazon (AMZN) returned the discretionary sector to little changed by Thursday's close.
On Friday, investors received the December Employment Situation Report. The report fit pretty well into the market's view of things, as the headline disappointment (156,000; Briefing.com consensus 175,000) was offset by a sizable revision to the November reading (to 204,000 from 178,000). Average hourly earnings rose 0.4% (Briefing.com consensus 0.3%) after declining 0.1% in November. November average workweek was revised down to 34.3 from 34.4 and the December reading remained at 34.3 (Briefing.com consensus 34.4).
Equity indices advanced to new record highs after the December jobs report while Treasuries retreated, erasing a large portion of their gains from earlier in the week. Despite the pullback, the benchmark 10-yr note eked out its third consecutive weekly gain, pressuring its yield to 2.42% from last week's 2.45%.
The December jobs report gave a boost to the greenback, but the U.S. Dollar Index could not avoid a lower close for the week, shedding 0.1%, despite setting a fresh 14-year high on Tuesday.
There was no significant shift in rate hike expectations during the past week. The fed funds futures market ended the week showing a 69.0% implied likelihood of a rate hike in June.
Equity indices started the day flat after the December Employment Situation report was met with a muted reaction from investors. The stock market picked up the pace about an hour into the session, trending upwards to a record intraday high where it remained until the closing bell.
Friday's release of the December Employment Situation report alluded to the fact that the labor market is approaching full employment; job growth is slowing, while wages are ticking up. Time will tell if the Fed sticks to their proposed rate-hike schedule, which calls for three rate hikes in 2017, but the Employment Situation report certainly didn't reveal anything that would suggest a change of plans.
Today's rally was led by the technology sector (+1.0%), which was aided by chipmakers and large cap components. For instance, Apple (AAPL 117.91, +1.30), Microsoft (MSFT 62.84, +0.54), Facebook (FB 123.41, +2.74), Alphabet (GOOGL 825.21, +12.19), and Visa (V 82.21, +1.12) all added between 0.9% and 2.3%, while the PHLX Semiconductor Index finished higher by 0.8%.
Cyclical sectors did slightly better than their defensive counterparts, with three of the six growth-sensitive sectors beating the benchmark index. Utilities (+0.3%) and health care (+0.3%) were the only non-cyclical sectors to perform in line with the broader market. Health care capitalized on the biotech industry's solid showing, evidenced by the 0.9% increase in the iShares Nasdaq Biotechnology ETF (IBB 280.65, +2.54). Telecom services (-2.7%) and real estate (unch) were the only sectors to finish in the red.
Standings for the week look much the same as ten out of eleven sectors finished the week higher, with telecom services (-1.2%) bucking the trend. The week's top performer was health care (+2.9%), followed closely by real estate (+2.2%), technology (+2.4%), and consumer discretionary (+2.3%). The consumer discretionary sector's gain was particularly impressive as the sector had to overcome a poor week from retailers. The SPDR S&P 500 Retail ETF (XRT 43.76, -0.26) finished the first week of 2017 lower by 0.7% after some of its components reported disappointing holiday sales.
Conversely, small caps ended the week on a down note as the Russell 2000 fell 0.4% in Friday's session. On the week, the small-cap index added 0.7%, but underperformed relative to the S&P 500's and the Nasdaq's respective, 1.7% and 2.6% week-to-date gains. Given that the domestically-focused Russell 2000 set the pace for the post-election rally, investors may be concerned about the index's recent struggle.
The Treasury market saw stepped-up selling pressure after the 8:30 ET release of the Employment Situation report for December, but cooled off afterwards. The 10-yr yield closed the day seven basis points higher at 2.42%.
Reviewing today's economic data:
- Employment Situation Report
- December nonfarm payrolls came in at 156,000 while the Briefing.com consensus expected a reading of 175,000. The prior month's reading was revised to 204,000 from 178,000. Nonfarm private payrolls added 144,000 while the Briefing.com consensus expected an increase of 170,000. The unemployment rate held at 4.7% (Briefing.com consensus 4.7%).
- Average hourly earnings increased 0.4% (Briefing.com consensus +0.3%). The average workweek was reported at 34.3 while the Briefing.com consensus expected a reading of 34.4.
- The key takeaway from the December employment report is that job growth is slowing while wages are rising, which are offshoots of a labor market running near full employment.
- November trade balance showed a deficit of $45.2 billion while the Briefing.com consensus expected the deficit to hit $42.2 billion. The previous month's deficit was revised to $42.4 billion from $42.6 billion.
- The key takeaway from the report is that the widening deficit will be a drag on fourth quarter GDP, as the fourth quarter average of $61.9 billion for the real trade deficit is 9.4% higher than the third quarter average.
- The Factory Orders Report for November showed a decrease of 2.4% while the Briefing.com consensus expected a decrease of 2.1%. The October reading was revised up to 2.8% from 2.7%.
- The key takeaway from the report is that the drop in manufacturing orders was owed predominately to a large retreat in orders for the volatile nondefense aircraft and parts component. Excluding transportation, orders were up 0.1%.
- Nasdaq Composite +2.6% YTD
- S&P 500 +1.7% YTD
- Dow Jones Industrial Average +1.0% YTD
- Russell 2000 +0.6% YTD
The stock market enjoyed an upbeat start to 2017, as the S&P 500 gained 1.7% during the abbreviated first week of the year. The Nasdaq Composite (+2.6%) outperformed while the Dow Jones Industrial Average (+1.0%) lagged.
The first two sessions of the week featured a steady advance, which placed the S&P 500 just below its record high from December. The two days of gains were followed by an intraday pullback on Thursday, but the brief slip became a distant memory by day's end. However, it is worth noting that the weak spell was brought on by cautious guidance from Kohl's (KSS) and Macy's (M). The two names registered respective losses of 19.0% and 13.9%, while most other apparel names also struggled. Conversely, a daylong rally in Amazon (AMZN) returned the discretionary sector to little changed by Thursday's close.
On Friday, investors received the December Employment Situation Report. The report fit pretty well into the market's view of things, as the headline disappointment (156,000; Briefing.com consensus 175,000) was offset by a sizable revision to the November reading (to 204,000 from 178,000). Average hourly earnings rose 0.4% (Briefing.com consensus 0.3%) after declining 0.1% in November. November average workweek was revised down to 34.3 from 34.4 and the December reading remained at 34.3 (Briefing.com consensus 34.4).
Equity indices advanced to new record highs after the December jobs report while Treasuries retreated, erasing a large portion of their gains from earlier in the week. Despite the pullback, the benchmark 10-yr note eked out its third consecutive weekly gain, pressuring its yield to 2.42% from last week's 2.45%.
The December jobs report gave a boost to the greenback, but the U.S. Dollar Index could not avoid a lower close for the week, shedding 0.1%, despite setting a fresh 14-year high on Tuesday.
There was no significant shift in rate hike expectations during the past week. The fed funds futures market ended the week showing a 69.0% implied likelihood of a rate hike in June.
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Economic Data
from Briefing.com| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 06 | 08:30 | Nonfarm Payrolls | Dec | 156K | 185K | 175K | 204K | 178K |
| Jan 06 | 08:30 | Nonfarm Private Payrolls | Dec | 144K | 180K | 170K | 198K | 156K |
| Jan 06 | 08:30 | Unemployment Rate | Dec | 4.7% | 4.7% | 4.7% | 4.6% | -- |
| Jan 06 | 08:30 | Hourly Earnings | Dec | 0.4% | 0.3% | 0.3% | -0.1% | -- |
| Jan 06 | 08:30 | Average Workweek | Dec | 34.3 | 34.4 | 34.4 | 34.3 | 34.4 |
| Jan 06 | 08:30 | Trade Balance | Nov | -$45.2B | -$44.0B | -$42.2B | -$42.4B | -$42.6B |
| Jan 06 | 10:00 | Factory Orders | Nov | -2.4% | -2.3% | -2.1% | 2.8% | 2.7% |
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Technical Update
DOW JONES INDUSTRIAL AVERAGE19963.8 +64.51 (+0.32%)
Volume: 277.70 Mil above average of 188.41 Mil
Range: 19834.08 - 19999.63
S&P500 INDEX
2276.98 +7.98 (+0.35%)
Volume: 1957.18 Mil above average of 1270.66 Mil
Range: 2264.06 - 2282.1
DOW JONES TRANSPORTATION AVERAGE
9104.08 +52.32 (+0.58%)
Volume: 60.39 Mil above average of 33.36 Mil
Range: 9014.18 - 9145.85
NASDAQ COMPOSITE
5521.060059 +33.12 (+0.60%)
Volume: 1710.77 Mil below average of 1899.01 Mil
Range: 5482.810059 - 5536.52002
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Market Internal
NYSE :Lower than average volume @ 758.2M vs 910.7M
Decliners outpaced Advancers(adv/dec): 1399M/1551M
New highs outpaced low(high/low): 104/8
NASDAQ :
Lower than average volume @ 1691.4M vs 1837.4M
Decliners outpaced Advancers(adv/dec): 1269M/1533M
New highs outpaced low(high/low): 94/20
Decliners outpaced Advancers by 1.16 to 1 on lower volumes 2449.6 ( -10.86%) than avg 2748 (+0.14%)
VOLATILITY S&P500 (VIX) :
11.32 -0.35 (-3.00%)
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Bonds
from Briefing.comBonds
Market Moving Factors- 30-year Treasury yield touches 50-day moving average at 2.949%, first time since September
- December Employment Situation Report:
- Nonfarm payrolls: Actual 156K, Briefing.com consensus 175K, Prior 178K (revisions added 19K over prior two months)
- Nonfarm private payrolls: Actual 144K, Briefing.com consensus 170K, Prior 156K
- Unemployment rate: Actual 4.7%, Briefing.com consensus 4.7%, Prior 4.6%
- Hourly earnings: Actual 0.4%, Briefing.com consensus 0.3%, Prior -0.1%
- Average workweek: Actual 34.3, Briefing.com consensus 34.4, Prior 34.4
- November Trade Balance: Actual -$45.2 bln, Briefing.com consensus -$42.2 bln, Prior -$42.4 bln (revised from -$42.6 bln)
- Cleveland Fed President Mester (non-FOMC voter): U.S. economy is basically at full employment, three hikes in 2017 would be reasonable; more volatility in forecasts because of uncertain policy in Washington
- November Factory Orders: Actual -2.4%, Briefing.com consensus -2.1%, Prior 2.7%
- Dallas Fed President Kaplan (FOMC voter): Thinks there is additional labor market slack but we are rapidly removing it; December employment report consistent with relatively solid GDP growth for H2 2017 (more than 2%); says businesses are excited about deregulation but concerned about disruption of supply chains; "I think we should be removing accommodation...but in a gradual and patient way"
- Chicago Fed President Evans (FOMC voter): Global economic climate is weak and there is the potential for GDP growth to slow markedly; two hikes in 2017 is reasonable, 3 hikes plausible
- Richmond Fed President Lacker (non-FOMC voter)
Treasuries Dive on Stronger Wage Growth
- U.S. Treasuries sold off sharply today after the Department of Labor reported that average hourly earnings grew by 0.4% m/m (2.9% y/y) during December. The year-on-year pace was the fastest of the recovery and fixed-income investors figure that if fiscal stimulus does materialize from Washington, D.C., the Fed will have to hike rates rapidly to keep PCE inflation near its 2% target. Four Fed policymakers spoke publicly today -- only Evans and Kaplan are voters -- but they said nothing about the next meeting at which they might favor tightening. Dallas Fed President Kaplan can probably be pinned down as one of the policymakers who forecast three 25-basis point rate hikes for 2017 back at the December FOMC meeting. Chicago Fed President Kaplan remains dovish but said that two rate hikes this year would be "reasonable" and three would not be implausible. The U.S. Dollar Index added 0.70% to 102.23, making back some of its losses from Wednesday and Thursday. The S&P 500 is adding 0.46% at 2,279.5
- Yield Check:
- 2-yr: +6 bps to 1.23%
- 5-yr: +8 bps to 1.93%
- 10-yr: +7 bps to 2.42%
- 30-yr: +6 bps to 3.01%
- News:
- The December Employment Situation Report showed a miss on headline payroll growth (156K vs. Briefing.com consensus 175K) but the prior two months' saw net upward revisions of 19K,
- Average hourly earnings growth jumped to 0.4% m/m after a surprise 0.1% decline in November (Briefing.com consensus for December was 0.3%)
- The unemployment rate ticked up to 4.7% from 4.6%, in line with the Briefing.com consensus
- The average workweek fell to 34.3 from 34.4. The Briefing.com consensus was for no change at 34.4
- Nonfarm private payrolls grew by 144K, missing the Briefing.com consensus of 170K. November's growth was 156K
- Average hourly earnings saw year-on-year growth of 2.9%, the fastest rate of the recovery so far
- U.S. factory orders fell by 2.4% m/m in November, mostly reversing October's 2.7% jump. The Briefing.com consensus was -2.1%
- The U.S. trade deficit widened to $45.2 bln for November from $42.4 bln in October. The Briefing.com consensus estimate was $42.2 bln
- Dallas Fed President Kaplan (FOMC voter) said today that he supported the removal of monetary accommodation (hiking rates) but still believes that the Fed can do it gradually
- He estimated that the neutral Fed funds rate is around 1.75%, which does imply a fair amount of tightening from current levels (113 basis points in Fed funds)
- Chicago Fed President Charles Evans, who votes on monetary policy decisions in 2017 said today that the global economic climate is weak and that there is potential for global growth to slow markedly. Evans also said, however, that he is optimistic about U.S. economic growth and expects inflation to return to the Fed's 2% target over the next two to three years
- Richmond Fed President Jeffrey Lacker, who does not vote this year, said that policy rates may have to rise more than the markets expect. He said that he expects U.S. GDP will grow at 2.0% in 2017 and decline to 1.75% from 2018 onwards
- Cleveland Fed President Loretta Mester (non-FOMC voter) said this morning that the December employment report was decent
- She continues to see three rate hikes in 2017 as reasonable
- She said that she has more inflation penciled in than some of her colleagues
- The December Employment Situation Report showed a miss on headline payroll growth (156K vs. Briefing.com consensus 175K) but the prior two months' saw net upward revisions of 19K,
- Commodities:
- WTI crude: unch at $53.76/bbl.
- Gold: -0.80% to $1,171.9/troy oz.
- Copper: +0.06% to $2.54/bbl.
- Currencies:
- EUR/USD: -0.64% to 1.0529
- USD/JPY: +1.34% to 117.03
- Week Ahead:
- Monday: Boston Fed
President Rosengren (non-FOMC voter) (09:00 ET); Chicago Fed President
Evans (FOMC voter) (13:00 ET); Atlanta Fed President Lockhart (non-FOMC
voter) (12:40 ET); November Consumer Credit (15:00 ET)
- Tuesday: November Wholesale
Inventories (10:00 ET); $24 bln 3-year Treasury auction (results at 13:00
ET)
- Wednesday: MBA Mortgage
Index for the week ending 1/7 (07:00 ET); Crude Inventories for the week
ending 1/7 (10:30 ET); $20 bln 10-year Treasury reopening (results at
13:00 ET)
- Thursday: December
Import prices ex-oil and Export prices ex-ag. (08:30 ET); Philadelphia Fed
President Harker (FOMC voter) (08:30 ET); Chicago Fed President Evans
(FOMC voter) (08:45 ET); Initial Jobless Claims for the week ending 1/7
and Continuing Jobless Claims for the week ending 12/31 (08:30 ET); Natural
Gas Inventories for the week ending 1/7 (10:30 ET); Atlanta Fed President
Lockhart (non-FOMC voter) (12:30 ET); $12 bln 30-year Treasury reopening
(results at 13:00 ET); St. Louis Fed President Bullard (non-FOMC voter) (13:15
ET); Fed Chair Yellen (FOMC voter) (17:30 ET)
- Friday: December PPI and Core PPI (08:30 ET); December Retail Sales and Retail Sales ex-auto (08:30 ET); Philadelphia Fed President Harker (FOMC voter) (09:30 ET); November Business Inventories (10:00 ET); January Michigan Sentiment (10:00 ET)
- Monday: Boston Fed
President Rosengren (non-FOMC voter) (09:00 ET); Chicago Fed President
Evans (FOMC voter) (13:00 ET); Atlanta Fed President Lockhart (non-FOMC
voter) (12:40 ET); November Consumer Credit (15:00 ET)
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Preview: Week of 9-13 January 2017
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 09 | 15:00 | Consumer Credit | Nov | $19.3B | $18.0B | $16.2B | $16.0B | |
| Jan 10 | 10:00 | JOLTS - Job Openings | Nov | NA | NA | 5.534M | ||
| Jan 10 | 10:00 | Wholesale Inventories | Nov | 0.9% | 0.9% | -0.4% | ||
| Jan 11 | 07:00 | MBA Mortgage Applications Index | 01/06 | NA | NA | 0.1% | ||
| Jan 11 | 10:30 | Crude Inventories | 01/06 | NA | NA | -7.100M | ||
| Jan 12 | 08:30 | Export Prices ex-ag. | Dec | NA | NA | 0.2% | ||
| Jan 12 | 08:30 | Import Prices ex-oil | Dec | NA | NA | -0.1% | ||
| Jan 12 | 08:30 | Initial Claims | 01/07 | 245K | 255K | 235K | ||
| Jan 12 | 08:30 | Continuing Claims | 12/31 | NA | NA | 2112K | ||
| Jan 12 | 10:30 | Natural Gas Inventories | 01/07 | NA | NA | -49 bcf | ||
| Jan 12 | 14:00 | Treasury Budget | Dec | NA | NA | -$14.4B | ||
| Jan 13 | 08:30 | PPI | Dec | 0.3% | 0.3% | 0.4% | ||
| Jan 13 | 08:30 | Core PPI | Dec | 0.1% | 0.1% | 0.4% | ||
| Jan 13 | 08:30 | Retail Sales | Dec | 0.8% | 0.7% | 0.1% | ||
| Jan 13 | 08:30 | Retail Sales ex-auto | Dec | 0.6% | 0.6% | 0.2% | ||
| Jan 13 | 10:00 | Business Inventories | Nov | 0.5% | 0.6% | -0.2% | ||
| Jan 13 | 10:00 | Mich Sentiment | Jan | 99.0 | 98.5 | 98.2 |
Commentary
Market internals are not as bullish as the market seems, S&P 500 broke it's historical high and DOW is just below, but does it have enough juice to break it?
Direction for Monday, 9 January 2017: Down
Direction for Week of 9 - 13 January 2017: -
Daily Accuracy: 1/3 33.33%
Direction for Monday, 9 January 2017: Down
Direction for Week of 9 - 13 January 2017: -
Daily Accuracy: 1/3 33.33%
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