Weekly Market Update, May 1, 2017

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.


Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 1.53% 1.03% 7.16% 17.32%
Nasdaq Composite 2.33% 2.35% 12.71% 27.39%
DJIA 1.91% 1.45% 6.71% 20.51%
MSCI EAFE 3.11% 2.62% 10.20% 11.53%
MSCI Emerging Markets 1.74% 2.21% 13.95% 19.04%
Russell 2000 1.50% 1.10% 3.59% 24.58%

Source: Bloomberg


Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market 0.77% 1.59% 0.83%
U.S. Treasury 0.69% 1.37% –0.65%
U.S. Mortgages 0.65% 1.13% 0.66%
Municipal Bond 0.73% 2.32% 0.14%

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®