Weekly Market Update – 13 November 2017 BMO

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A Taxing Release

Stocks got off to a good start this week, hitting new record highs on Monday and Wednesday, but retraced their gains in the latter half–a move that was nominally attributed to the release of the Senate’s tax reform bill. More likely, however, this week’s loss was the result of some profit taking following a largely uninterrupted two-month rally. The S&P 500 and the Nasdaq shed 0.2% apiece, while the Dow lost 0.5%.

The financial sector paced this week’s retreat, which is fitting considering the group played a leadership role in the market’s most recent bullish run; the financial sector jumped 11.4% from September 8 to November 3, while the benchmark S&P 500 added 5.1%. Dow components JPMorgan Chase (JPM) and Goldman Sachs (GS) lost 3.9% and 1.7% this week, respectively.

Industrial shares also struggled, with transports showing particular weakness; the Dow Jones Transportation Average dropped 2.6%.

Meanwhile, the energy sector outperformed, finishing with a gain of 1.1%. The group benefited from an increase in the price of crude oil, which touched its highest level in more than two years; WTI crude futures finished higher by 2.0% at $56.75/bbl. Heightened tensions in the Middle East, which could potentially disrupt crude production in the region, were largely credited for the move.

Saudi Arabia’s Crown Prince Mohammad bin Salman ordered the arrests of some of the country’s most prominent political and business figures on allegations of corruption. In addition, Saudi Arabia ordered its citizens to leave Lebanon after accusing the country of declaring war, citing the presence of Iranian-backed Hezbollah members within the Lebanon government.

Back in the U.S., earnings season continued this week–albeit with fewer notable companies on the docket–but headlines were focused on M&A developments. Sprint (S) and T-Mobile US(TMUS) lost 7.2% and 3.6%, respectively, after announcing over the weekend that they could not reach a merger agreement.

Meanwhile, chipmaker Broadcom (AVGO) slipped 3.2% after bidding $70 per share (in cash and stock) for Qualcomm (QCOM), which, conversely, ended the week higher by 4.5%. There were also reports that the Department of Justice would require the sale of CNN before it would approve AT&T’s (T) acquisition of Time Warner (TWX), but later reports said that claim was false.

Also of note, Walt Disney (DIS) and 21st Century Fox (FOXA) were reportedly in discussions regarding a sale of assets to Disney from Fox in recent weeks.

On the political front, the Senate on Thursday released its version of a tax reform bill, which called for delaying a cut in the corporate tax rate to 20% from 35% by one year and differed from the version that the House unveiled last week in several other key areas–including deductions related to state and local property taxes.

The two chambers will have to hammer out those differences in order to put the bill on the president’s desk for approval, and uncertainty surrounding Congress’ ability to do just that were cited by some as the main catalyst for Wall Street’s weakness in the latter half of the week.

Following this week’s events, investors still strongly believe that the Fed will raise rates next month, with the CME FedWatch Tool placing the chances of a December rate hike at 100.0%.

(Excerpts from Briefing.com)

Dollar Erases Morning Dip

Bonds: Long End Leads Market Lower

Commodities: Crude keeps on rallying for fifth week

Gold bounces, Silver continues to strengthen and Copper retreats. Baker Hughes total U.S. rig count increased by 9 to 907 following last week’s decrease of 11

Agriculture: Soy consolidates, Corn falls back, Wheat strengthens



Week 46 is the sixth and final week of Q3 Earnings Season with WMT ending the season on Thursday BMO.

Monday 13 to 17 November (Week 46)

The forty-sixth week of 2017 (wk46) is bullish over the last five years on our seasonal models but divergent over the last 10 and 15 years.

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The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 46;

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Key Economic Dates

In the US, the most important releases will be inflation, retail trade, industrial production and housing data. Investors will also be waiting for: UK inflation and unemployment; preliminary GDP growth for Japan and Germany; China factory output, retail sales and fixed investment; Australia employment and India consumer and producer inflation.

Mon 13 November

Tue 14 November

Wed 15 November

Thu 16 November

Fri 17 November


Wrapped up Batch 92 in Singapore last night. Now the work for these traders really begins.

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In the meantime, the US market is looking tired over the last three weeks. The coming week will test its resilience but I won’t be betting against the bulls just yet.

Happy Hunting!

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