Market Perspective for January 5, 2018

The Nasdaq led the week’s performance with an increase of 3.38 percent. The S&P 500 advanced 2.60 and the Dow Jones Industrial Average 2.33 percent. Technology SPDR (XLK) and Materials SPDR (XLB) returned 3.67 and 3.78 percent this week.

The Markit and ISM purchasing managers’ indexes for December showed a robust manufacturing sector. The Markit and ISM manufacturing surveys increased to 55.1 and 59.7, respectively. The ISM survey showed raw material and customer inventories falling, along with rising prices. Some survey respondents said construction demand was rising in areas affected by the 2017 hurricanes. The ISM services declined to 55.9 after new orders slowed.

The U.S. economy created 148,000 new jobs last month, leaving the unemployment rate unchanged at 4.1 percent. Economists expected 195,000 new hires, but financial markets took the miss in stride. Rate hike odds for March and June were effectively unchanged. Average hourly earnings increased 0.3 percent, in-line with expectations.

Construction and manufacturing hiring was strong, which is consistent with strong home sales data in recent months and the jump in the PMI. The miss largely came from retail. Hiring is usually strong into December as stores add holiday help, but the category saw a decline of 20,000.

Weekly jobless claims hit 250,000 in the last week of December. Motor vehicle sales hit an annualized pace of 17.9 million in December. A 7-year streak of rising auto sales ended in 2017, with a small dip of 1.8 percent. Construction spending increased 0.8 percent in November, beating economists’ median forecast of 0.5 percent.

Technology performed well this week despite the discovery of a huge CPU design flaw. Intel (INTC) bore the blame initially and shares fell more than 6 percent this week before recovering. Shares of AMD still finished the week up double-digits. The net effect on the sector was positive. iShares PHLX Semiconductor (SOXX) gained in every day of trading this week, returning 5.70 percent.

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