The Week In Review

11/17/17

Stocks ended a rather uneventful Friday session modestly lower as investors turned their attention to the upcoming Thanksgiving holiday week.

The Dow lost 0.4%, while the S&P 500 and the Nasdaq dropped 0.3% and 0.2%, respectively. Small caps outperformed, sending the Russell 2000 higher by 0.4%.

Most of the S&P 500's 11 sectors finished Friday in negative territory, but losses were pretty modest overall. The top-weighted technology sector (-0.7%) showed relative weakness, as did the utilities (-0.7%) and real estate (-0.6%) groups, while the other laggards finished with losses of no more than 0.5%.

On the flip side, the energy sector advanced 0.4% to register its only win of the week. Energy shares climbed in tandem with the price of crude oil, which managed to retrace just about all of its weekly decline; West Texas Intermediate crude futures jumped 2.5% to $56.71 per barrel, ending the week with a slim loss of 0.1%.

Retail shares also advanced on Friday, thanks to an overwhelmingly positive batch of quarterly earnings.

Foot Locker (FL 40.82, +8.97), Abercrombie & Fitch (ANF 15.55, +3.00), and Shoe Carnival (SCVL 26.75, +6.12) were the top performers, adding between 23.9% and 29.7%, after all three companies reported better-than-expected profits for the third quarter. Abercrombie & Fitch and Shoe Carnival also provided upbeat sales guidance.

Similarly, Ross Stores (ROST 72.25, +6.56) and Gap (GPS 29.40, +1.92) added 10.0% and 7.0%, respectively, following upbeat results.

In other corporate news, 21st Century Fox (FOXA 31.15, +1.83) climbed 6.2% following reports that Comcast (CMCSA 36.16, -0.91) is interested in acquiring a substantial piece of the company and Tesla (TSLA 315.05, +2.55) added 0.8% after unveiling its new semi truck and next-generation Roadster.

U.S. Treasuries ended on a mixed note, pushing the 2yr-10yr spread lower by three basis points to 63 bps. The yield on the 2-yr Treasury note climbed two basis points to 1.72%, while the benchmark 10-yr yield slipped one basis point to 2.35%.

Elsewhere, equity indices in the Asia-Pacific region finished Friday mostly higher, with Japan's Nikkei and Hong Kong's Hang Seng adding 0.2% and 0.6%, respectively. Meanwhile, European bourses were weak on Friday, sending the Euro Stoxx 50 lower by 0.5%.

Reviewing Friday's economic data, which was limited to October Housing Starts and Building Permits:

Housing starts increased to a seasonally adjusted annualized rate of 1.290 million units in October (Briefing.com consensus 1.198 million), up from a revised 1.135 million units in September (from 1.127 million). Building permits increased to a seasonally adjusted 1.297 million in October (Briefing.com consensus 1.243 million) from a revised 1.225 million in September (from 1.215 million).

The key takeaway from the report is that it will be a positive input for fourth quarter GDP forecasts as the number of units under construction --1.096 million -- was slightly ahead of the third quarter average of 1.077 million.

On Monday, investors will receive just one economic report--October Leading Indicators--which will be released at 10:00 ET.

Nasdaq Composite +26.0% YTD

Dow Jones Industrial Average +18.2% YTD

S&P 500 +15.2% YTD

Russell 2000 +10.0% YTD

Week In Review: Lots of Noise, Little Movement

The U.S. equity market ended a busy week little changed, with the benchmark S&P 500 losing just 0.1%. Meanwhile, the Dow dropped 0.3% this week, while the Nasdaq and small-cap Russell 2000 outperformed, finishing with gains of 0.5% and 1.2%, respectively.

Investors continued to keep an eye on Capitol Hill, where Republican lawmakers are trying to implement the biggest tax overhaul in more than 30 years. The House passed its version of a tax reform bill on Thursday, while the Senate continued to make changes to its version, which will now includes a provision to repeal the Affordable Care Act's individual mandate.

Retailers dominated this week's batch of earnings--one of the final batches of the third quarter earnings season.

Shares of Wal-Mart (WMT) jumped 10.9% to a new all-time high on Thursday after the world's largest retailer reported better-than-expected earnings and revenues for the third quarter and issued upbeat profit guidance for fiscal year 2018. Conversely, shares of Target (TGT) tumbled 9.9% on Wednesday after the company issued a disappointing earnings forecast for the holiday season.

Ross Stores (ROST), Gap (GPS), Advance Auto (AAP), Foot Locker (FL), Abercrombie & Fitch (ANF), Buckle (BKE), Shoe Carnival (SCVL), and Hibbett Sports (HIBB) all soared after beating quarterly profit estimates. Most also beat sales estimates, and many provided upbeat guidance.

Unsurprisingly, the S&P 500's consumer discretionary (+1.3%) and consumer staples (+1.0%) sectors, which house retailers, finished near the top of the week's sector standings. The telecom services (+0.8%) group also outperformed, trimming its November loss to 2.1%.

On the flip side, the energy sector (-3.4%) struggled, giving back the prior week's advance and then some. The price of crude oil decreased at the beginning of the week--which didn't bode well for the energy group--but the commodity bounced back on Friday to end the week little changed; West Texas Intermediate crude futures slipped 0.1% to $56.71 per barrel.

Industrial shares also underperformed after General Electric (GE) cut its dividend by half and dialed back its profit forecast for 2018. GE shares ended the week lower by 11.1%, extending their year-to-date decline to 42.4%. The S&P 500's industrial sector lost 1.1% for the week.

In the bond market, U.S. Treasuries moved in a curve-flattening trade, sending the 2yr-10yr spread to its lowest level since 2007. The yield on the benchmark 10-yr Treasury note dropped five basis points to 2.35%, while the 2-yr yield climbed six basis points to 1.72%.

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%.