Market Perspective for October 13, 2017

Equities hit new all-time highs this week following strong economic data. Technology, industrials and materials outperformed the broader market. The Dow Jones Industrial Average led index performance with an increase of 0.43 percent.

The Job Openings and Labor Turnover Survey (JOLTS) reflected 6.1 million job openings at the end of August. The quit rate was 2.1 percent, consistent with 2017’s previous reports. Initial claims for unemployment fell to 243,000 last week, well below expectations of 258,000.

Strong retail sales matched solid employment data. Sales increased 1.6 percent in September. Auto sales rose 3.6 percent, and building materials stores saw growth of 2.1 percent as hurricane recovery began. Stripping out these items and gasoline sales (which fluctuate with oil prices) showed core retail sales up 0.4 percent.

Consumer confidence strengthened in early October. The University of Michigan’s confidence survey hit 101.1, its highest reading since 2004. Sub-components indicated strong confidence in financial markets and income optimism.

The Federal Reserve’s minutes of the September FOMC meeting showed support for a December hike, but some officials were concerned about inflation being below the Fed’s 2 percent target. Producer prices were consistent with the Fed’s mandate in September, rising 0.4 percent as energy prices rebounded. Consumer prices also increased sharply, up 0.5 percent, but the core number only rose 0.1 percent. The odds of a December rate finished the week at 83 percent.

Healthcare providers fell on Friday after President Trump signed an executive order ending bailouts for insurers. Insurers will also be able to sell insurance across state lines and market short-term plans that last longer than three-months. iShares U.S. Health Providers (IHF) fell 0.96 percent on the day.

Earnings season started well. Delta Air Lines (DAL) beat expectations by 4 cents. Shares gained 3.7 percent on the week. Blackrock (BLK), the firm behind the iShares line of ETFs, rose 2.6 percent after it beat earnings estimates by 6 percent. Assets under management grew 17 percent versus a year-ago.

J.P. Morgan (JPM) beat estimates by 7 percent, but low volatility in the markets dragged trading revenue lower. Citigroup beat estimates by 8 percent, but investors worried about higher credit costs. Bank of America (BAC) and Wells Fargo (WFC) beat earnings as well, but Wells slipped on higher-than-expected litigation costs unrelated to its fake accounts scandal. The financial sector consolidated following its 10 percent rally in the prior month. SPDR Financials (XLF) declined 1.1 percent on the week.

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