Weekly Market Update – 03 July 2017 BMO

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The stock market endured some volatility, which resulted in a lower finish for the major indices. Relative weakness among technology stocks sent the Nasdaq Composite down 2.0% for the week while the S&P 500 surrendered 0.6%. The price-weighed Dow Jones Industrial Average (-0.2%) ended the week little changed.

The influential financial sector opened the week on a positive note, ending its four-session losing streak with a gain of 0.5%. However, negative performances from the heavily-weighted technology and health care groups mitigated the bullish influence of financials, leaving the benchmark index just a tick above its unchanged mark. Meanwhile, crude oil registered its third-consecutive win, climbing 0.8%.

Things got a bit more interesting on Tuesday, especially in the global bond market, where sovereign yields jumped after European Central Bank President Mario Draghi provided an upbeat assessment of eurozone inflation and growth trends. The financial group outperformed, once again, amid a steepening of the yield curve, but the ten remaining sectors finished in the red with the technology group pacing the retreat.

The midweek session brought some relief as investors bought the dip and put the S&P 500 back at its flat line for the week. The financials and technology sectors led the charge, but strength was broad-based with nine sectors settling in the green. The improvement in risk sentiment came after the ECB said that Mr. Draghi’s Tuesday remarks were misinterpreted as hawkish while they were meant to strike a balance. However, longer-dated Treasuries and German bunds held their ground.

The relief rally didn’t last long as the market reversed and set a fresh low for the week on Thursday. The technology sector fell to heavy profit-taking, dropping 1.8%. Selling was broad-based with only the financials and energy spaces escaping the session with wins. Banks underpinned the financial group after the Federal Reserve approved the capital plans of all 34 banks required to partake in the annual stress test.

Thursday also saw more selling in the global bond market. Treasuries tumbled in a curve-steepening trade while German bunds slid following hotter than expected inflation data out of Germany.

Friday’s session featured a weak rebound in the broader market, as financials, health care, and technology struggled. NIKE (NKE) surged more than 10.0% after beating earnings expectations, which helped keep the market above water.

The fed funds futures market still points to the December FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 54.4%, up from last week’s 51.3%.

The stock market was on track to end Friday on its session high, but quarter-end selling during the final minutes of the action knocked the key indices off their afternoon highs. The S&P 500 added 0.2%, trimming this week’s loss to 0.6%, while the Nasdaq Composite (-0.1%) underperformed, widening its weekly decline to 2.0%. Shielded from this week’s underperformance in technology, the Dow Jones Industrial Average (+0.3%) shed just 0.2% for the week. The S&P 500 ended the second quarter with a gain of 2.6% while Dow climbed 3.3% and Nasdaq advanced 3.9%.

(Excerpts from Briefing.com)

Currencies:

The Canadian dollar jumped to a nine-month high against the dollar today as WTI crude rallied 2.05% to $45.85/bbl. While the Canadian economy faces risks from a frothy housing market and a potentially secular decline in oil prices, the greenback itself has been very weak (this was the worst quarter for the dollar since 2010) and Bank of Canada Governor Poloz has signaled that a July rate hike is in play. The euro pulled back from a one-year high today although inflation ran faster than expected in the eurozone during June. Thursday’s report of higher-than-expected CPI growth in Germany may have set the market up to expect bigger things. The Swiss franc pulled back from a one-year high as well despite improvement in economic leading indicators. The Japanese yen traded near to a one-month low although the 10-year JGB yield touched its highest level since the Ides of March (0.09%). The antipodean currencies both traded higher as Chinese PMI data beat estimates. The kiwi dollar touched a four-month high. The Chinese yuan hit a seven-month high against the greenback. The U.S. Dollar Index is up 0.09% to 95.72

Bonds yields: The curve rose and steepened for the week

Commodities: ABCDE 

AgricultureThe USDA released two big reports today: 

 Acreage report shows:

Quarterly grain stocks report shows:

Friday’s Closing Prices:

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Week27_2017 THE WEEK AHEAD

Looks like we in for a boring week if the statistics play according to history.

Monday 03 July to Friday 07 July (Week 27)

The twenty-seventh week of 2017 (wk27) is flat-to-bullish for the DIA and the SPY over all the 5, 10 and 15 year averages with less than 60% average reliability.

Our weekly models over 5, 10 and 15 year averages show the DOW and SPY as flat throughout the week with slight bullishness on Friday.

DIAweek27SPYweek27 

The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 27;

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Key Economic Dates

Sun 02 July

Mon 03 July

Tue 04 July

Wed 05 July

Thu 06 July

Fri 07 July

Sat 08 July

Sun 09 July

SUMMARY

The week before earnings is always unpredictable and rather dull. To add to the confusion, the week is also heavy with employment and manufacturing data and the G20 meetings.

Happy Hunting!

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