Politics Give Equity Markets Pause - Baird Financial Advisor

May 19, 2017 | Private Wealth Management ? Value Equity

Week in Review

Politics Give Equity Markets Pause

Equity markets ended down for the week after turmoil in Washington, D.C. cast doubt on the fate of the Trump administration's legislative agenda. On Wednesday, the S&P 500 recorded its worst day since September, down 1.8%. Financials were the worst-performing S&P sector, down 1.0% for the week. The major indices bounced part way back, with the Dow Jones and S&P 500 both ending the week down just 0.4% and the NASDAQ down 0.6%.

Markets fell midweek after the New York Times reported that President Trump asked former FBI Director James Comey to shut down a federal investigation into former national security advisor Michel Flynn in February. Investors feared a potential derailment of President Trump's pro-growth initiatives. The CBOE Volatility Index (VIX) spiked more than 40% on Wednesday, its biggest move since September.

Oil prices climbed 6.0% for the week on growing expectations that an agreement will be made to extend current production cuts at OPEC's meeting next week. Earlier in the week, Saudi Arabia and Russia agreed on prolonging the production cuts through the first quarter of 2018. The U.S. Energy Information Administration reported that last week's domestic oil inventories fell for the sixth consecutive week, down 1.8 million barrels to 520.8 million. According to oilfield-services firm Baker Hughes (BHI), the U.S. oil rig count rose by 8 to 720 this week. The count is up 402 rigs from a year ago.

Housing starts fell 2.6% month over month in April to an annual rate of 1.2 million. Single-family starts (two-thirds of new construction) rose 0.4% to 835,000. Starts for the volatile multi-family segment fell 9.2% to 337,000 in April, after falling 7.9% in March.

Industrial production rose 1.0% in April, the strongest gain since 2014, after increasing 0.4% in March. The April increase was led by motor vehicles with volumes up 5.0%. Business equipment and production for consumer goods contributed to the 1.0% increase in manufacturing. High-tech and construction supplies fell for the month. Capacity utilization, which measures slack across industrial firms, rose 0.6% to 76.7%.

Initial jobless claims fell to 232,000 in the May 13 week, below both the consensus expectation of 240,000 and last week's 236,000. The 4-week average of 240,750 was down 2,750 from the week before.

Stock Indices DJIA NASDAQ S&P 500 Russell 2000

Price 20,805

6,084 2,382 1,367

+/-

%

-91.8 -0.4

-37.5 -0.6

-9.2 -0.4

-15.4 -1.1

Bonds/Notes UST 2 year UST 10 year UST 30 year

Yield 1.27 2.23 2.90

+/-

%

-0.03 -2.2

-0.09 -4.0

-0.09 -3.0

Commodities Crude Futures Gold Futures

Price 50.72 1,255

+/-

%

2.88

6.0

27.30

2.2

Currencies USD/EUR JPY/USD

Price 1.12

111.54

+/-

%

0.03

2.5

-1.69 -1.5

The changes shown reflect the difference from the previous Friday's closing prices.

Stock Indices Year-to-date

DJIA NASDAQ S&P 500 Russell 2000

% 5.27 13.01 6.38 0.75

Sources: Bloomberg, FactSet

The Week Ahead: U.S. economic reports expected next week include New Home sales, FOMC Minutes, Jobless Claims, and GDP.

Robert W. Baird & Co.

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May 19, 2017 | Private Wealth Management ? Value Equity

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The S&P 500 is a stock market index that includes 500 large companies and is intended to be a representative sample of leading companies in leading industries in the U.S. economy. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded large-cap stocks. The Nasdaq Composite Index is a an index of the more than 3,000 common equities listed on the Nasdaq stock exchange; the index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds, or debentures. The Russell 2000 is a subset of the Russell 3000 index, which consists of the 3,000 largest U.S. public companies. The Russell 2000 index consists of the 2000 smaller companies on the Russell 3000 index, and is considered a small-cap index.

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