The Week In Review

1/20/17

 The rubber has finally met the road as Donald Trump became the 45th President of the United States on Friday. It will now be up to his administration to live up to the post-election hype that pushed the stock market up nearly 7.0% between the November 8th election and the S&P 500's record high on January 6th. So far so good, as the major averages finished with modest gains: S&P 500 (+0.3%), Nasdaq (+0.3%), Dow (+0.5%).

Much like the rest of the week, today's session was underpinned by a wait-and-see mentality as investors appeared to have already priced in Mr. Trump's pro-growth promises. The equity market opened the day immediately higher, but cut its gain in half during President Trump's inaugural address.

During the address, Mr. Trump struck a populist tone, reiterating his protectionist trade policy and promising to put American workers at the heart of every decision he makes. There wasn't really any new information in the President's address, just a fresh reminder of Mr. Trump's commitment to bring jobs back to America--a commitment that could hit manufacturers' bottom lines. The major averages responded by sliding from their highs, eventually ticking up in the final stretch of action.

Sector standings were consistent throughout the day, with telecom services (+0.9%) and materials (+0.9%) camping out at the top of the leaderboard, and health care (-0.3%) and industrials (unch) setting up shop at the bottom. Each of the remaining seven sectors closed in the green.

Energy (+0.5%) broke its two-session losing streak, piggybacking on crude oil's 2.1% advance. The commodity finished at $53.25/bbl, climbing for the second consecutive day as investors eyed this weekend's OPEC/non-OPEC compliance meeting, hoping for indications of a tightening market.

The financial sector (+0.5%) had a poor showing this week, despite ending Friday with an uptick. The space lost 1.6% for the week as better-than-expected quarterly earnings results from some of its top components were met with a sell-the-news response in the wake of the sector's huge 20.5% fourth quarter gain.

The top-weighted technology sector (+0.5%) also finished the day higher. Technology started the day on a positive note after both IBM (IBM 170.55, +3.74) and Skyworks Solutions (SWKS 88.67, +10.21) reported better-than-expected earnings, adding 2.2% and 13.0%, respectively. Skyworks Solutions' spike also had a ripple effect on other chipmakers, evidenced by the 1.3% increase in the PHLX Semiconductor Index.

In addition to IBM, three more Dow components reported before today's opening bell, including American Express (AXP 76.20, -0.49), General Electric (GE 30.53, -0.68), and Procter & Gamble (PG 87.45, +2.75). American Express and General Electric declined 0.6% and 2.1%, respectively after reporting disappointing results while Procter & Gamble jumped 3.3% on better than expected earnings-per-share and upbeat organic sales growth.

U.S. Treasuries finished their trading day mixed with the the 2-yr note higher while longer-dated issues ticked lower. The yield curve steepened with the 2-yr yield closing three basis points lower at 1.19% and the 30-yr yield finishing one basis point higher at 3.06%. The benchmark 10-yr yield closed unchanged at 2.47%.

Looking ahead, investors will not receive any economic data on Monday, but they will see a slew of earnings reports. Most notably, McDonald's (MCD 122.26, +0.08) and Halliburton (HAL 56.45, +1.11) will report before the open, while Yahoo! (YHOO 42.05, -0.04) will report after the close.

Russell 2000 -0.4% YTD

Dow Jones Industrial Average +0.3% YTD

S&P 500 +1.5% YTD

Nasdaq Composite +3.2% YTD

Week in Review: Stocks Slip During Inauguration Week

The stock market endured another range-bound week, which ended with the market remaining just below its record high from January 6. The S&P 500 shed 0.2% for the week while small caps underperformed, sending the Russell 2000 lower by 1.4%.

Bond and equity markets were closed on Monday for Martin Luther King Jr Day while the remainder of the week featured a sideways drift ahead of Friday's inauguration of Donald Trump as the 45th President of the United States. The stock market enjoyed a big post-election rally on hopes that deregulation and policies introduced by the new administration would boost economic growth. However, with the S&P 500 soaring nearly 7.0% in the month that followed Election Day, the past five weeks featured range-bound trade.

Only three sectors ended the week in negative territory with two registering weekly losses larger than 1.0%. The financial sector lost 1.6% for the week, but the decline took place after the sector soared nearly 20.0% in the five weeks after the election. The health care sector also underperformed, but the countercyclical group remained in the green for the month (+1.3%) despite surrendering 1.5% last week.

On the upside, consumer staples (+1.9%) and telecom services (+0.8%) recorded solid weekly gains. In the staples sector, Procter & Gamble (PG) jumped 3.3% on Friday after beating earnings expectations and raising its organic sales growth guidance.

Rate hike expectations solidified a bit with the fed funds futures market projecting a 70.3% implied likelihood of a rate hike in June, up from 69.0% at the end of last week.