Weekly Market Update – 30 January 2017 BMO

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The stock market enjoyed a solid week, which saw the three major averages climb to fresh record highs. The S&P 500 gained 1.0% for the week while the Dow Jones Industrial Average (+1.3%) and Nasdaq Composite (+1.9%) outperformed. The Dow received added attention in the media during the second half of the week after making its first appearance above the 20000 level on Wednesday.

The past week was highlighted by a healthy dose of quarterly reports from influential market components like Alphabet (GOOGL), Boeing (BA), Microsoft (MSFT), McDonald’s (MCD), Intel (INTC), Texas Instruments (TXN) and Qualcomm (QCOM) among others. In general, results from the tech sector were strong while earnings from other areas of the market were more mixed.

At the end of the week, roughly 34% of S&P 500 components had reported their results, showing a blended earnings growth rate of 4.0% versus market expectations for growth of 5.2%, according to FactSet.

The economic calendar also featured a fair share of reports, but the market did not appear particularly concerned with disappointing December Existing Home Sales (5.49 million; Briefing.com consensus 5.55 million), December New Home Sales (536,000; Briefing.com consensus 589,000), advance fourth quarter GDP (+1.9%; Briefing.com consensus 2.2%), nor December Durable Orders (-0.4%; Briefing.com consensus 3.0%).

Rate hike expectations held firm with the fed funds futures market pointing to a 71.9% implied likelihood of a rate hike in June.

Net Exports Weigh Down Q4 GDP
The advance estimate for fourth quarter GDP showed real GDP increase at an annual rate of 1.9% (Briefing.com consensus 2.2%) after increasing 3.5% in the third quarter.  The Price Deflator was up 2.1%, as expected, versus a 1.4% increase in the third quarter.

The key takeaway from this report is that fourth quarter activity revealed the strong third quarter growth was as an aberration, yet that point aside, the salient takeaway for many is that this is a backward-looking report and the markets have their sights set on a brighter economic outlook for 2017, which is expected to feature deregulation, tax reform, and infrastructure spending among other items.

Dollar Rallies Despite Soft GDP Report
The U.S. Dollar Index gained 0.19% to 100.57 today as the greenback rallied against the Japanese yen and British pound. The dollar traded higher despite a weaker-than-expected Q4 U.S. GDP Report, likely because of its oversold condition following a difficult start to 2017. After reaching 103.82 on the first trading day of the year, the Dollar Index fell under 99.80 on Wednesday. European yields have shown a lot more enthusiasm on the upside on the past few sessions so it is possible that the euro and British pound begin to made headway higher against the dollar. It was the sharp divergence between German Bund and U.S. Treasury yields that drove the dollar’s strength against the euro in November and December

(Excerpts from Briefing.com)

Bonds remained generally unchanged from the previous week’s close, thus maintaining its normal-to-steep personality.

Commodities had a flattish week with nary a gain or loss across all the trading complexes.

Agriculture Closing Prices



Monday 30 January to Friday 03 February (Week 05)

The fifth week of January (wk5) is bullish for the SPY and DIA over the last 5, 10 and 15 years with the benchmarks with an average 60%.

The 2017 Stock Trader’s Almanac’s averages for the DOW and S&P500 are flat on Monday,  mildly bullish on Tuesday at around 54%, very bullish on Wednesday at 76% and flat-to-bearish on Thursday and Friday at an average 53%.

Key Economic Dates

Mon 30 Jan
• EU Spanish Flash CPI y/y
• US Core PCE Price Index m/m, Personal Spending m/m, Pending Home Sales
• Japan Monetary Policy Statement, BOJ Outlook Report, BOJ Policy Rate

Tue 31 Jan
• Japan BOJ Press Conference
• EU CPI and Core CPI Flash Estimate y/y, Prelim Flash GDP q/q,
• EU German Retail Sales m/m, German Unemployment Change
• US Chicago PMI, Consumer Confidence
• China Manufacturing PMI, Non-Manufacturing PMI

Wed 01 Feb
• UK Manufacturing PMI
• EU Economic Forecast
• US ADP Non-Farm Employment Change, ISM Manufacturing PMI, FOMC Statement, Fed Funds Rate
• Australia Building Approvals, NAB Quarterly Business Confidence, Trade Balance

Thu 02 Feb
• UK Construction PMI, BOE Inflation Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate
• US Prelim Unit Labor Cost q/q, Prelim Nonfarm Productivity q/q
• Australia RBA Monetary Policy Statement
• China Caixin Manufacturing PMI

Fri 03 Feb
• UK Services PMI
• US Non-Farm Employment Change, Unemployment Rate, ISM Non-Manufacturing PMI

 Earnings Calendar for the week of January 30


Last week’s call was spot on which gives me a hint that the market may be back to its normal patterns;

I will be holding out on buying and will remain on my long Puts for now. But I will be watching for any sign of reversals towards the end of this week just in case.

This week is the reverse of last week but don’t let the slightly bullish nature of the start of the week fool you into complacency. February can be a disappointing month for the bulls as history has proven so often. I will be long this week but I won’t holding the long beyond Wednesday.

Happy Hunting!


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