Market Perspective for November 11, 2016

Markets enthusiastically traded higher on the week as investors welcomed the conclusion of the presidential election. A significant futures market sell-off on Tuesday quickly reversed once the results were confirmed. The Dow Jones industrial average climbed to a new record, while the S&P 500 Index was within a percentage point of its all-time high. The tech-heavy Nasdaq gained more than 3 percent, but turned lower as Internet shares fell on Thursday. The Russell 2000 Index fell steadily in October, but gains this week reversed all those losses.

Financials, biotechnology, energy and health care led the rally. SPDR S&P Regional Bank (KRE) advanced more than 10 percent, JPMorgan (JPM) climbed over 9 percent and SPDR S&P Bank (KBE) reached its highest level in more than eight years in the two days after the election.  Pharmaceuticals also enjoyed a rally following the election. Pfizer (PFE) and Merck (MRK) both gained 7 percent on Wednesday, while SPDR Biotech (XBI) climbed more than 14 percent. The SPDR Select Sector Health Care ETF (XLV) was up almost 8 percent and the iShares Nasdaq Biotechnology ETF (IBB) rose 15 percent. The 30-year Treasury index fell, and gold declined as the U.S. dollar index rose 2 percent. The MSCI Emerging Markets ETF (EEM) lowered by approximately 2 percent in response to the election, while the iShares MSCI EAFE (EFA) ETF was up slightly more than 1 percent.

Chinese trade balance figures missed both import and export forecasts with a $49 billion surplus, the lowest in six months. The country’s consumer price index (CPI) rose 2.1 percent due to a 0.2 percent increase.  Tuesday’s Jobs Opening and Labor Turnover Survey (JOLTS) report indicated 5.49 million openings, slightly below estimates. Layoffs, however, were at a record low.  First time unemployment claims were also better than expected at 254,000, confirming sustained strength in the labor market.

Weekly crude inventory increased and West Texas Intermediate Crude remained relatively unchanged near $44 per barrel. Energy Select Sector SPDR ETF (XLE) shares rose more than 4 percent with overall market strength. Although December rate hike expectations fell slightly, St. Louis Fed President James Bullard indicated Thursday that the Fed would increase the discount rate.

Priceline (PCLN) delivered better-than-expected earnings and revenues on Monday, sending shares higher by 8 percent. Shake Shack (SHAK) also exceeded earnings estimates, reported better same-store sales and reiterated positive full-year guidance. SHAK stock rose 11 percent following Wednesday’s report. Disney (DIS) shares increased, despite earnings and overall revenues that missed target estimates. The company’s ESPN sports division continues to underperform.

The stock price of embattled Valeant Pharmaceuticals (VRX) fell more than 30 percent, but pared half of that loss as the week progressed. Mylan (MYL) overcame its recent pricing scandals with acquisitions and new product launches. MYL shares rose 10 percent following positive earnings and revenues. Although sales and earnings missed forecast estimates, shares of Macy’s (M) rose 10 percent when the company reaffirmed its future sales growth targets. Kohl’s (KSS) shares jumped 8 percent as the company handily beat earnings and revenue estimates.

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