Market Perspective for June 16, 2017

The Nasdaq declined for the second consecutive week due to the large-cap technology correction. The tech heavy index lost 0.9 percent. The Dow Jones Industrial Average, however, gained 0.5 percent with advances in financials, industrials and healthcare, all of which advanced on the week. The S&P 500 0.1 percent.

Amazon (AMZN) rattled retail and consumer sectors with its purchase of Whole Foods (WFM). Shares of Kroger (KR) fell 16 percent intraday on Friday, Target (TGT) nearly 12 percent and Wal-Mart 7 percent before they all bounced. Despite the rebound later in the day, SPDR S&P Retail ETF (XRT) fell to a new 52-week low.

SPDR Industrials (XLI) rose 1.61 percent following the resignation of General Electric (GE) CEO Jeff Immelt. Immelt will be replaced by John Flannery, 30-year GE veteran and head of the healthcare division. GE gained 4.66 percent on the week, and accounted for about one-quarter of the industrial sector’s increase over the past 5 days.

The Federal Reserve raised the Fed funds rate to a range of 1.00 to 1.25 percent on Wednesday. The U.S. dollar rallied after the Fed announcement, which included a plan to reduce its balance sheet by $10 billion a month starting later this year. The Fed will not sell assets, but instead forego the reinvestment of proceeds from maturing bonds. The Fed will also step up the amount by $10 billion every three months until it hits $50 billion.

The CPI in May was lower than expected, with further declines expected. The 10-year Treasury yield fell as low as 2.10 percent as the bond market digested slowing inflation. Corporate, investment-grade and Treasury bonds all rallied to new highs as long-term interest rates declined. The U.S. Dollar Index rallied.

Business inventories and retail sales came in lower than expected, and housing starts were 1.092 million, down from year-ago levels. Initial claims for unemployment were better than expected at 237,000. The Atlanta Federal Reserve lowered its second quarter GDP growth forecast to 2.9 percent.

Oil fell to a new 52-week low on Thursday following another large inventory build. Typically, gasoline inventory falls during the summer driving season, but it rose in 2016 and 2017 is following a similar trajectory. Oil production also remains high as shale costs fall.




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