If there was any doubt that the U.S. stock market was following both policy expectations and news coming from the new White House administration, the markets response on Monday should have put some of those doubts to rest. Stocks gapped lower at the opening bell, after a tumultuous news cycle over the weekend, following President Trump’s executive order to restrict immigration from seven countries and temporary suspend the refugee program for four months, among other things.
Roughly 90 minutes into the trading day the major market averages reached their low point for the day as selling subsided. Though still finishing lower on the day, the major averages went on to recoup roughly half over their early losses, with the Standard and Poor’s 500 declining 0.60 percent by the closing bell. The new administration has been hard at work its first week in office making good on its campaign promises, but Monday’s declines in the stock market is a reminder that it won’t always be smooth sailing for the Trump Team.
Most investors have been anxiously awaiting the new administration’s economic promises such as tax reform, but after this weekend’s events may be realizing that they will have to exercise more patience than they expected.
A large number of companies will be reporting their quarterly earnings this week, which will give investors a better sense of the strength of the U.S. economy. On Wednesday of this week, following the FOMC meeting, the Federal Reserve will release its guidance on interest rates. Though there is little chance the Fed will raise interest rates at this time, investors will be listening for any changes to the Fed’s expectation of raising interest rates roughly three times later this year.
Laif E. Meidell, CMT
We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster
Weekly Economic Update
HOUSEHOLD SENTIMENT GAUGE RISES AGAIN
The University of Michigan’s Index of Consumer Sentiment gained 0.4 points from its preliminary reading this month to reach a final January mark of 98.5. That represents a 12-year peak for the index, which stood at 92.0 in January 2016.1,2HOME SALES
FELL IN DECEMBER
Given costlier mortgages, rising prices, and tight inventory, the December retreat for resales was not surprising. The National Association of Realtors said that existing home sales slipped by 2.8% last month. New home sales dropped 10.4%, but the Census Bureau stated that they increased 12.2% for 2016, marking the best year for new home buying since 2007.3
FIRST ESTIMATE OF Q4 GDP: 1.9%
If that Department of Commerce appraisal holds, it will mean that the economy grew just 1.9% for all of 2016, contrasting with 2.6% expansion in 2015. Hard goods orders fell 0.4% in December, but rose 1.7% minus defense orders.2
DOW TOPS 20,000, STOCKS REGAIN MOMENTUM
Leaving some mid-January doldrums behind, the major indices rallied nicely last week. The Dow advanced 1.34% to 20,093.78; the Nasdaq Composite, 1.90% to 5,660.78; and the S&P 500, 1.03% to 2,294.69. The CBOE VIX “fear index” finished the week down at 10.53.4
Monday offers reports on December personal spending and pending home sales. The Conference Board’s monthly consumer confidence index and a new Case-Shiller home price index appear Tuesday, along with earnings from Aetna, Aflac, Ally Financial, Anadarko Petroleum, Apple, Chubb, Coach, Eli Lilly, ExxonMobil, Harley-Davidson, MasterCard, Nucor, Pfizer, Sprint, Under Armour, UPS, U.S. Steel, Valero Energy, and Xerox. Wednesday, the Federal Reserve wraps up a policy meeting, ADP’s January payrolls report and ISM’s January manufacturing PMI arrive, and Allstate, Altria, AmeriGas, Ameriprise Financial, Anthem, Avery Dennison, Celanese, Energizer Holdings, Exelon, Facebook, Ingersoll-Rand, MetLife, Pitney Bowes, and Symantec all announce earnings. Thursday’s earnings parade includes results from Amazon, Amgen, Callaway Golf, Chipotle, Cigna, ConocoPhillips, Coty, Estee Lauder, GoPro, Hanesbrands, International Paper, Motorola Solutions, Parker, Philip Morris, Merck, Ralph Lauren, Ryder, Sirius XM, SkyWest, Snap-On, and Visa; also, Challenger issues January job-cut data, and new initial claims figures are released. Investors consider the January ISM services PMI and January hiring figures Friday, plus earnings from AutoNation, Clorox, Hershey, Phillips 66, Regis, and Weyerhaeuser.