Market Perspective for September 22, 2017

The Russell 2000 joined the Dow Jones Industrial Average, Nasdaq and S&P 500 when it exceeded its old high on Friday. The Russell 2000 was the strongest index this week with a 1.33-percent rise. The Dow and S&P 500 saw smaller gains, while the Nasdaq slipped after hitting a new high on Tuesday.

SPDR S&P Regional Banking (KRE) rallied 10.1 percent over the past 11 trading sessions. iShares U.S. Aerospace & Defense (ITA) gained 3.97 percent this week. It has risen for seven consecutive sessions.

Apple fell 5.0 percent this week and dragged the technology sector with it. Consumer discretionary also moved lower as Amazon (AMZN) declined.

Japanese and European central banks are still engaged in quantitative easing. The next important shift will come when the ECB changes its quantitative easing policy. Investors expect details at the October meeting. Currently, the ECB is buying $60 billion a month in bonds. It is approaching legal limits on how much debt it can own in a single country, which will force it to reduce government bond purchases. Until the ECB changes policy, the effects of the Fed’s policy on world financial markets will be limited.

Housing starts slowed slightly in August, but building permits increased. iShares U.S. Home Construction (ITB) made a new intraday 52-week high.

Unemployment claims tumbled to 259,000 last week. Economists expected the number to stay near 300,000 in the wake of Hurricanes Harvey and Irma, but almost half of the decline came from Texas.

FedEx (FDX) earned $2.51 adjusted for one-time items in the prior quarter, well below forecasts of $3.09 and down from $2.82 a year ago. The company blamed a cyberattack, Hurricane Harvey and higher-than-expected merger costs. It also lowered guidance for 2018. Investors bid shares up 2 percent, nonetheless, sending FedEx to a new all-time high.

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