As everyone knows, stocks went into a dramatic spiral on Monday, February 5th, as the DJIA plummeted almost 1,600 points, which was the biggest point decline in history. But right before the market closed, buyers charged back into the market and limited the damage – but the DJIA still lost 1,175 points.
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Market Review – The last trading day of 2017 began on a high note with stocks surging. The ascent was fleeting as stocks retreated for much of the day. The selling intensified late in the day and left major benchmarks at their lows. The Dow Jones Industrial Average and S&P 500 both ended down 0.5%, while the Nasdaq Composite fell 0.7%. Light trading for the holiday-shortened week left declines of 0.1% for the Dow, 0.4% for the S&P 500 and 0.8% for the Nasdaq. But the benchmarks all had solid performances for 2017, closing with price gains of 28.2% for the Nasdaq, 25.1% for the Dow and 19.4% for the S&P 500.
It’s that time when we bid farewell to the current year and begin the banalities of resolutions. Whatever yours happens to be, we wish you great success. Perhaps more importantly, OmniStar wishes you a new year of happiness, success and good health. Enjoy the last Market Perspectives of 2017 and we look forward to sharing the next edition in February 2018.
Stocks continued their climb on Friday following strong earnings from the Technology sector. The Nasdaq (tech heavy index) climbed 0.7%, while the S&P 500 added 0.3% and the Dow Jones Industrial Average followed with a 0.1% gain. Another healthy earnings season is winding down and Q4 is underway. If we use history as our guide, November and December tend to be good months for investors. Nevertheless, 2017 has already provided noteworthy performance. Year-to-date gains are now 25.7% for the Nasdaq, 19.1% for the Dow and 15.6% for the S&P 500.
Markets reacted positively last week to the long awaited outline of President Trump’s tax reform. Affectionately known as the “reflation trade”, risk-on sectors reengaged and outperformed, but small cap stocks and the technology sector were the brightest stars. Reaching the close on Friday, the Nasdaq Composite gained 1.1% and S&P 500 moved up 0.4%. Based on investor optimism, tax reform may be the key to a continuing bull market.
Looking back, August brought little change to markets. Beneath seemingly quiescent waters, dramatic and momentous events took center stage. First, Charlottesville gripped the nation, a total eclipse captivated every age, and the month gave its farewell with a deluge of rain and misfortune in Texas. During all that, geopolitical tensions intensified as North Korea continued its repugnant behavior. We now head into arguably the worst market month, September.
Stocks were mixed on Friday as the Dow Jones Industrial Average managed a 0.2% rise, but the Nasdaq Composite and S&P 500 both fell fractionally by 0.1%. Everyday can’t be one of growth and, frankly, we don’t think that is healthy for a sustainable market. Looking past daily market movement, second-quarter GDP was in line with the consensus at 2.6%, more than double first-quarter results. This data presents a solid rebound but remains short of President Trump’s target of 3 to 4%. Year-to-date, things are still looking good and stocks remain stronger relative to bonds.
The S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices, was recently released for April 2017; nationwide home prices continue their rise over the trailing 12 months. The Case-Shiller Index covers all nine U.S. census divisions which reported a 5.5% annual gain in April, down from 5.6% in March. The 10-City Composite showed a slight decrease of 4.9%, down from 5.2% the previous month and the 20-City Composite posted a 5.7% year-over-year gain, down from 5.9% in March.
Political headlines are coming at an alarming pace. In spite of this, markets were relatively quiet last week which left U.S. equity prices little changed. Treasury yields moved slightly lower as the dollar weakened; our dynamic yield curve is beginning to flatten. Oil prices also declined for a fourth straight week. Nevertheless, the Federal Reserve remained on track to slowly normalize monetary policy. As expected, the Fed funds rate rose by 25 basis points to 1.0%. Additionally, the Fed hinted at the likelihood of one more increases before year-end. Normalizing the country’s balance sheet should be viewed as a positive. However, it wasn’t long ago that our Fed vowed to raise rates only when inflation reach higher levels. To date, that has not happened.
Last week, stocks started the abbreviated trading week on a down note, but things turned around heading into Thursday and Friday, pushing the major benchmarks to record highs. Equity prices closed higher on Friday, June 2, following a non-farm payrolls report that showed a weaker-than-expected 138,000 jobs were created in May (versus consensus of 185,000). Logic holds that stock prices would move lower on such news. However, the (negative) new jobs portion of the report was counterbalanced by lower unemployment and (almost undetectable) wage inflation. In essence, news is mixed and markets are maintaining their resilience.