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January 2017

Meidell: Market has its headphones on

By Published Articles

The major market averages opened lower on Thursday, in one of the more persistent early selloffs we have seen so far this year. However, after falling enough to cast some doubt on the recent bull market in stocks, prices found their low point around mid-morning then began a recovery rally into the market’s close. By the closing bell the major averages had recovered most of their losses with the Standard & Poor’s 500 lower by 0.21 percent and the Nasdaq Composite off 0.29 percent. At one point during the morning the Russell 2000 small company index was down by as much as 2.01 percent, before buyers helped lift the index to finish lower by just 0.77 percent on the day.

Generally speaking, the stock market has been stalled out since early December, which may be trying some investor’s patience lately. However, just like a youth bopping down the street as they listen to their favorite song through their headphones, the stock market has its headphones on as well. You and I can’t necessarily hear the music, but the market has its own dance steps and has a purpose behind the steps it has made so far. Once prices move higher, like they did in November, they typically have to mark time, which is something like dancing in place for a while. To investors this can look like a short price decline, or prices can merely trade sideways for a while, which is what we have been watching since early December.

Though sharp declines like we saw Thursday morning can be scary, so far, volatility measures appears to be relatively subdued. This typically means that the potential exists for higher highs in the market averages in the near future.

This week most areas of the bond market are little changed making it difficult to draw much of a conclusion as to what is on investors’ minds. The top performing bonds for the week were led by the Bloomberg Barclay’s U.S. Convertible Bonds index up 0.47 percent over the past five trading days, followed by the S&P/Citigroup International Treasury Bond index higher by 0.28 percent over the same period.

January 10, 2017 – Weekly American Wealth Review

By Weekly Newsletter

Weekly Letter

We wish you and your loved ones health, prosperity and happiness in the new year. As we begin the new year, some investors may be watching last year’s biggest winners to see if they will continue to lead the stock market higher, while others may be focused on the broadly followed Dow Jones Industrial Average to see if it will surpass its 20,000 level and signal potential further gains. However, just like the magician’s sleight of hand, it’s easy to get distracted and miss the Nasdaq Composite’s recent gains, closing at new all-time highs for the fourth day in a row on Tuesday, and up 3.13 percent year to date.

Though market moving reports were sparse on Tuesday, investors could take comfort in the December NFIB Small Business Optimism index whose reading of 105.8 was well both above consensus and the prior month. In fact, the December reading of 105.8 was the highest since December of 2004. The NFIB reported that roughly half of business owners expect better economic conditions, with the largest contributions to the index coming from increased readings in both higher real sales expectations and a view that now is a good time to expand.

Sincerely,
Laif E. Meidell, CMT

We hope you have a wonderful week and a great start to a new year,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

RISING WAGES, MODERATE HIRING IN DECEMBER

The Department of Labor’s latest employment report shows the average hourly wage at $26.00 last month, up 2.9% in a year. That is the largest annualized wage increase seen since June 2009. Payrolls expanded by 156,000 additional hires in December, leaving total 2016 job growth at a 5-year low of 2.2 million. (This could be a sign of the labor market reaching full employment.) The headline jobless rate ticked up to 4.7%, while the U-6 rate encompassing the underemployed was at 9.2%.1

MANUFACTURING ACTIVITY PICKED UP AS 2016 ENDED

Investors liked what they saw in the Institute for Supply Management’s December purchasing manager indices. ISM’s manufacturing PMI rose 1.5 points to 54.7, its best reading in two years. The Institute’s service sector PMI held steady at an impressive 57.2 last month.2,3

FED OUTLOOK: CAUTIOUSLY OPTIMISTIC

Minutes from the December Federal Reserve policy meeting noted that Federal Open Market Committee members were reasonably confident about the economy for 2017, while citing some “uncertainty about the timing, size and composition” of future policy moves. In other words, the Fed may or may not ultimately follow through on its 2017 forecast of three interest rate hikes. FOMC members saw “only a modest risk” of a “sharp acceleration in prices” this year.4

DOW ENDS WEEK AT 19,964

The blue chips hit an intraday high of 19,999.63 Friday on the way to a 1.02% weekly advance to 19,963.80. As the Dow flirted with history, the S&P 500 and Nasdaq made history, respectively closing at record peaks of 2,276.98 and 5,521.06. The S&P gained 1.70% for the week; the Nasdaq, 2.56%. Dropping 19.37% in five days, the CBOE VIX “fear index” finished the trading week at 11.32.5,6

THIS WEEK

On Monday, Acuity Brands, Alcoa, and WD-40 report Q4 results. Nothing significant is scheduled on Tuesday. KB Home and SuperValu announce earnings Wednesday. Thursday, the latest initial jobless claims report appears, Federal Reserve chair Janet Yellen addresses teachers at a Washington, D.C. town hall meeting, and Delta Air Lines shares Q4 results. The week’s major news items all arrive Friday – investors will consider the December retail sales report from the Census Bureau, December’s Producer Price Index, the initial January University of Michigan consumer sentiment index, and earnings reports from Bank of America, BlackRock, JPMorgan Chase, PNC, and Wells Fargo.