Market Perspective for January 13, 2017

The Nasdaq pushed into record territory this week as technology and consumer discretionary sectors advanced. The other major indexes finished the week relatively unchanged, with the Dow Jones Industrial Average still hovering near the 20,000 mark. Healthcare stocks briefly fell on President-Elect Trump’s comments regarding drug prices before rebounding on Thursday and Friday. Nevertheless, iShares U.S. Healthcare Providers (IHF) is on a 5-day winning streak.

Bank of America, JPMorgan Chase and Wells Fargo all reported before the opening bell Friday. Bank of America (BAC) earned $0.40 per share on revenues of $19.99 billion. This beat analysts’ expectations. JPMorgan Chase (JPM) reported profit of $1.71 per share on revenues of $24.33 billion, well above analysts’ forecasts. A significant increase in its consumer banking operations contributed to the beat. Wells Fargo (WFC) reported earnings per share of $0.96 on revenues of $21.58 billion. All three stocks rallied at the open before giving back their gains.

Counter-trend rallies continued in gold and the benchmark 10-year Treasury. Both assets tumbled in late 2016 and rebounded in early 2017. Gold broke above $1,200 an ounce, approximately 70 above its late December low. The yield on the 10-year note slipped to 2.35 percent, down from the peak above 2.6 percent. Friday’s strong bank earnings triggered a rally in the 10-year yield, signaling a potential end to the interest rate pullback.

The Chinese Consumer Price Index (CPI) for December was 2.1 percent, slightly lower than the forecast 2.4 percent year-over-year growth. The 5.5 percent uptick in the country’s Producer Price Index (PPI) was well above expectations, driven by a 1.6 percent increase in December inflation. The U.S. PPI increased 1.6 percent versus last year and only 0.3 percent in December.

The Job Openings and Labor Turnover Survey (JOLTS) for November showed a slight decline that was in line with analysts’ expectations. The weekly crude oil inventory data Wednesday showed a much larger-than-expected build in stockpiles, weighing on prices. Traders discounted news that OPEC and major non-OPEC countries are abiding by their production cut agreement.

Analysts credit falling interest rates for the better-than-expected 5.8-percent increase in the mortgage purchase application index. Unemployment claims rose less than expected last week, and remain at historic lows. December retail sales climbed 0.6 percent, driven by strong demand for automobiles. The holiday season fizzled for department stores as sales fell 8.4 percent versus a 13.2-percent increase in online sales.

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