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February 21, 2017 – Weekly American Wealth Review

By February 21, 2017November 1st, 2017Weekly Newsletter

Weekly Letter

After the long holiday weekend, investors appeared to return to the markets with renewed optimism on Tuesday. U.S. stocks gapped higher at the opening bell, following the pre-market release of better than expected earnings news from a few of the U.S.’s top retailers. Within the first half hour of the trading day, investors received an additional boost of confidence as the February PMI Manufacturing Index flash reported a reading of 54.3. Any reading of 50 or above signifies expansion in the manufacturing sector, so even though the February reading was slightly below the prior month’s reading of 55.1, it still signifies a decent rate of growth. The Flash report is usually released about a week prior to the final report and gives investors some heads up on what to expect for the current month.

All the major market averages closed at new all-time highs on Tuesday with the Standard and Poor’s 500 rising 0.60 percent and the Nasdaq Composite gaining 0.47 percent. More importantly, Tuesday’s rally was broad based, with the Russell 2000 Small Cap Index leading the way higher, up 0.78 percent on the day.

In some ways, the stock market’s advance looks completely healthy, such as the resent highs in the New York Stock Exchange’s advance decline line. However, for some subsets of the market such as small companies, other indicators are beginning to show that that number of small company stocks participating in the recent rally is beginning to decline. This means that fewer companies are lifting the indexes, and just one sign that a rally is running out of steam.

Another indication that the recent rally in long in the tooth is the recent outperformance of two typically defensive sectors. On Tuesday, the Dow Jones U.S. Real Estate Index rose 1.26 percent and the Dow Jones U.S. Utilities Index gained 1.01 percent on the day.

We will continue to watch and see what happens with the various government and economic announcements in the next couple of weeks.

Sincerely,
Laif E. Meidell, CMT

We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

RETAIL SALES ROSE 0.4% IN JANUARY

Consumer spending on household electronics and appliances powered this gain. Analysts polled by Reuters had expected a 0.1% advance. Core retail purchases also rose 0.4% last month. The Department of Commerce revised the December increase for retail sales upward to 1.0%. Across the 12 months ending in January, retail sales advanced 5.6%.1

INFLATION PRESSURE MOUNTS

In January, the headline Consumer Price Index climbed 0.6%. That was its greatest monthly gain in four years, and it took annualized inflation to a 4-year high of 2.5%. Producer prices also jumped 0.6% in January, in the largest monthly increase seen since September 2012; that development left them up 1.6% year-over-year.1,2

BUILDING PERMITS UP, HOUSING STARTS DOWN

Unsurprisingly, groundbreaking declined in January. The Census Bureau recorded a 2.6% fall for housing starts in the winter weather. The rate of permits issued for future projects, however, increased by 4.6%.3

FURTHER GAINS IN A BULLISH FEBRUARY

The S&P 500 pulled off another weekly advance, adding 1.51% from February 13-17 on its way to a Friday settlement of 2,351.16. Its 5-day performance actually lagged both the Dow and the Nasdaq: the blue chips gained 1.75%, to 20,624.05, as the broad tech sector benchmark rose 1.82%, to 5,838.58.4

THIS WEEK

Monday is Presidents Day, so U.S. stock and bond markets are closed; America’s Car-Mart and Dillard’s report Q4 results. Tuesday, Advance Auto Parts, Cracker Barrel, HealthSouth, Home Depot, Kaiser Aluminum, La-Z-Boy, Macy’s, Medtronic, Newmont Mining, Nautilus, Papa John’s, Red Robin, and Walmart all join the earnings parade. On Wednesday, earnings from Cheesecake Factory, Chico’s FAS, DISH Network, Fitbit, Garmin, Green Dot, HP, Jack-in-the-Box, L Brands, Popeyes, Public Storage, Six Flags Entertainment, Square, Sunoco, Tesla, TJX, Toll Brothers, Transocean, and Weibo complement minutes from February’s Federal Reserve policy meeting and January existing home sales numbers. A new initial claims report arrives Thursday, along with earnings from AMC Networks, Baidu, Chesapeake Energy, Gap, Herbalife, Hewlett Packard Enterprise, Hormel Foods, iHeartMedia, Intuit, Kohl’s, Live Nation, Mitel, Nordstrom, Pinnacle Foods, Sears Holdings, Sprouts, and Toro. Friday, earnings from Berkshire Hathaway, Boise Cascade, Foot Locker, JCPenney, Magellan Health, and Revlon emerge, plus the final February University of Michigan consumer sentiment index and the January new home sales report.