Weekly Market Update – 09 January 2017 BMO

It wasn’t a bad week at all given all the Asian markets all closed with gains for the week. Australia’s S&P/ASX 200 was flat, with Singapore’s FTSE Straits Times Index adding 0.3%. Korea’s Kospi ended up 0.4% on news that Samsung Electronics estimates it would deliver its biggest quarterly operating profit in more than three years for the fourth quarter.

US MARKETS (Parts taken from Briefing.com)

The US finished the week on a sour note as economic numbers disappointed. Nonfarm Payrolls came in below expectations while the Unemployment Rate remained virtually unchanged at 4.7%. Trade deficit was wider than expected as the November Trade Balance report showed a widening in the deficit to $45.2 billion (consensus -$42.2 bln) from an upwardly revised deficit of $42.4 billion (from -$42.6 bln) for November.  The key takeaway from the report is that the widening deficit will be a drag on fourth quarter GDP, as the fourth quarter average of $61.9 billion for the real trade deficit is 9.4% higher than the third quarter average. Factory Orders went down in November as new orders for manufactured goods decreased 2.4% in November (consensus -2.1%) after increasing an upwardly revised 2.8% (from 2.7%) in October. November marked the first decline in factory orders in five months. The drop in manufacturing orders was owed predominately to a large retreat in orders for the volatile nondefense aircraft and parts component.

DOW Friday 6 January 2017 – Misses 20,000 by a dime.

In spite of of the hawkish numbers, the stock market closed the week on a higher note, with the S&P 500 and the Nasdaq finishing Friday’s session higher by 0.4% and 0.6%, respectively. The Dow (+0.3%) finished the day 34 points shy of the elusive 20k mark after coming within one point of the milestone early Friday afternoon.

Standings for the week look much the same as ten out of eleven sectors finished the week higher, with telecom services (-1.2%) bucking the trend. The week’s top performer was health care (+2.9%), followed closely by real estate (+2.2%), technology (+2.4%), and consumer discretionary (+2.3%). The consumer discretionary sector’s gain was particularly impressive as the sector had to overcome a poor week from retailers. The SPDR S&P 500 Retail ETF (XRT 43.76, -0.26) finished the first week of 2017 lower by 0.7% after some of its components reported disappointing holiday sales.

Conversely, small caps ended the week on a down note as the Russell 2000 fell 0.4% in Friday’s session. On the week, the small-cap index added 0.7%, but underperformed relative to the S&P 500’s and the Nasdaq’s respective, 1.7% and 2.6% week-to-date gains. Given that the domestically-focused Russell 2000 set the pace for the post-election rally, investors may be concerned about the index’s recent struggle.

Bonds

Bonds has a volatile shortened week of trading that saw yields rise and then fall and close lower for the week.

It is much too soon so say what the yields are implying but going back a month shows us that yields have been flattening again and Since the start of the year, it has pivoted on its belly. Doubt is still on the table.

(From 30 Dec 16 to 6 Jan 17)

Commodities mostly had a goods start to the year with Precious and Energy prices finishing higher for the week.

Agriculture Closing Prices

THE WEEK AHEAD

Tuesday 09 to Friday 13 January (Week 02)

The second week of January (wk2) is bearish for the SPY and DIA over the last 5 years, 10 and 15 years with the DOW carrying around than 50% reliability and the SPY at than 60%.

The 2017 Stock Trader’s Almanac’s averages for the DOW on Monday, Tuesday and Wednesday are bearish at around 58%%  and bullish on Thursday and Friday at around 55%.  The S&P500 is broadly flat for the week with a slightly bullish bias on Tuesday, Wednesday and Friday at an average of 55%.

Key Economic Dates

Sun 08 Jan
• Australia Building Approvals m/m
• China CPI and PPI

Wed 11 Jan
• UK Manufacturing Production m/m, Goods Trade balance

Fri 13 Jan
• US Core Retail Sales m/m, Retail Sales m/m, PPI, Consumer Sentiment

Earnings out next week as Q4 earnings season kicks off

SUMMARY

For the record, I am bearish for the coming week until JPM’s earnings on Friday BMO. With little economic numbers to move the market properly, volumes are not expected to come in full force as the general trading volumes wait for the start of earnings season.

Happy Hunting!!

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