Markets "In a Nutshell" for January 3, 2018Jan 03, 2018
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average was down 0.14%, the S&P 500 fell 0.36%, the New York Stock Exchange Composite (2,000 stocks) was up 0.09% and the average investors index (Value Line Index) was down 0.21%. Foreign stocks (DJ Global ex U.S.) were up 1.12%. Bond prices were higher for the week, pushing the yield on the 10-year U.S. Treasury down 8 basis point to finish the week at 2.41%. (Data sources: Barron’s Financial, Wall Street Journal)
Disappointing Economic Data to Close Out 2017
Economic reports out of the U.S. were mostly disappointing as 2017 came to a close. Initial jobless claims and inventories were higher than expected, while consumer confidence was lower than expected. Internationally, Japan once again reported positive economic data—with both inflation and industrial production coming in better than expected and a lower-than-anticipated jobless rate.
Stocks Finish 2017 Strong
In the U.S., stocks (as measured by the S&P 500) ended December by posting their ninth consecutive month of positive returns—the longest such streak since 1983. Energy stocks outperformed as frigid temperatures sent natural gas prices higher and as oil prices hit their highest level in years due to strong global demand. In contrast, financial services stocks—banks, specifically—underperformed as investors realized the recently passed tax law will have a negative short-term impact on banks’ capital ratios (a gauge of banks’ financial strength). Tech stocks also lagged, due mainly to disappointing sales of Apple’s newest iPhone.
Overseas, emerging markets outperformed for the week as commodity prices rose. European equities underperformed, however, due primarily to the negative impact that the new U.S. tax law will have on financial institutions’ capital ratios.
In the fixed-income markets, long-duration bonds outperformed as interest rates fell. Such bonds are more sensitive to changes in rates than are shorter-term securities. Preferred stocks underperformed, mainly due to weakness in bank-issued preferred stock (again because of the negative impact of the new tax law on capital ratios).
Which sector lead the way in terms of performance for 2017? a. Technology b. Utilities c. Healthcare d. Financials. Answer is below…
Have a good week!
Answer to quiz:
a. Technology – The technology sector was up over 36% in 2017.