Early last week, both the S&P and NASDAQ recorded all time highs before tumbling along with the Dow as political concerns rose.
By Friday, though, the markets had largely rebounded and steadied. The S&P 500 closed the week down 0.38%, the Dow saw a 0.44% loss, and the NASDAQ reported a 0.61% decline.
The MSCI EAFE reported up 0.79% for the week.
The
CBOE VIX is designed to measure
market volatility by using S&P 500 put and call
index option
prices.
For most of the year, volatility in the markets has been low. However, the CBOE Volatility Index (VIX) spiked 40% midweek before falling back by week's end, indicating a possible increase in market volatility.
Through the week's ups and downs, investors followed some other important economic developments.
LAST WEEK'S DEVELOPMENTS:
- Solid Regional Business Index
The Philadelphia Fed Business Outlook Survey again pointed to progress in the factory sector. While the consensus range was 16.0 - 25.0, the General Business Conditions Index-Level reported 38.8.
- Strong Corporate Earnings
With 90% of S&P 500 company Q1 earnings reports in, the earnings growth rate for S&P 500 companies remains bright with an average increase of 13.6%.
The softening U.S. dollar-down 5% so far in 2017-is helping companies that sell overseas. A weaker dollar will help companies with foreign earnings, as those earnings are more valuable when converted into U.S. dollars.
New home sales remained strong as the housing market index rose 2 points to 70. The data came out well ahead of the 65 - 6
9 consensus range.
However, April housing starts were lower than expected. Housing starts are now at a 1.172 million annualized rate, after falling 2.6%.
Total household debt rose to a new high, reporting a $149 billion increase to come in at $12.73 trillion.
Student loans and auto loans were major contributors to the rising debt:
- Student loans now make up about 10.6% of all U.S. household debt, rising to $1.3 trillion. Comparatively, in 2003, student loans only accounted for 3.3% of total household debt.
- Auto loans tighten as balances rose by 0.9%.Auto debt that is overdue by more than 90 days increased to 3.82% of total auto loans in Q1, the highest percentage in four years.
WHAT'S AHEAD
Economy
Manufacturing output rose 1.0 percent in April, the strongest monthly result in over 3 years. As such, investors will track how the rest of the second quarter shakes out.
In addition, we will be interested in this week's housing reports, hoping for a better handle on where this up-and-down sector is heading.
Geopolitica
l
Financial markets could experience some headwinds as geopolitical situations fester. Concerns over North Korea and political opposition to globalization remain.
In addition, Brazil is facing political disruption and a deep recession that could mean problems for companies with business interests in that country.
Similarly, continuing political challenges for the current U.S. administration may adversely affect proposed tax reform, health-care legislation, and infrastructure initiatives.
As always, we will continue keeping abreast of market and economic updates. We encourage you to focus on your long-term financial outlook. Should you have any questions, we are happy to help.
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