Market Update: Friday, November 10, 2017

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Market Recap

  • Major domestic indexes dipped lower, but climbed back off of worst levels. Tax reform concerns persist as reconciliation efforts between the House and Senate advance. S&P 500 Index -0.4%, Dow -0.4%, Nasdaq -0.6%.
  • Telecommunications and energy outperformed as oil marched higher; industrials, materials, and technology lagged.
  • 10-yr. Treasuries finished flat for the day, yields held firm at 2.33%, dollar down modestly.
  • Commodities WTI crude oil (+0.5% to $57.07/bbl.) continued move higher, COMEX gold flat performance at $1287/oz.
  • Economic results failed to provide a major directional driver as jobless claims came in only a bit higher than anticipated; flattening yield curve garnered more attention.

Overnight & This Morning 

  • U.S. stocks moving lower again, as continued worries over a delay in tax reform has sparked sellers. Remember though, the S&P 500 is up 8 weeks in a row and some weakness is perfectly normal.
  • Europe broadly lower, as bond yields have moved higher. DAX -0.1%, STOXX Europe 50 -0.2%, FTSE 100 -0.5%.
  • Asia lower, with the Nikkei the weakest index down -0.8%. The big news was China announced it would lift foreign ownership restrictions on joint ventures. Shanghai Composite +0.1%, Hang Seng -0.1%.
  • 10-yr. Treasury higher (2.38%), while U.S. dollar is lower versus the yen.
  • Bond markets are closed due to the Veterans Day holiday.
  • Commodities- Oil is flat at $57.15/bbl., gold down slightly (-0.1% to $1285/oz.), industrial metals lower across the board yet again.
  • Economic data- Michigan consumer confidence is the only economic data today.

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Key Insights

  • Will tax reform really be delayed till 2019? News that the implementation of the corporate tax rate reduction may be delayed one year as a “pay for” may have contributed to recent stock market weakness. This suggests a fair amount of tax reform optimism is priced in to broad markets, although the performance of asset classes and securities sensitive to tax reform still reflect greater skepticism. Keep in mind that a simple tax cut would be easier to get done, represents a solid backup plan, and would have a similar positive impact on corporate profits. Behind the scenes, the House’s ability to move its tax reform bill rapidly out of committee and onto the House floor was a positive. This is the second time a key hurdle was met on an accelerated timeline. The House also pragmatically passed the Senate version of the budget bill in October in order to get the tax process started. For key milestones and barriers to tax reform, see this week’s Weekly Economic Commentary, “Tax Reform Timeline”.

Macro Notes

  • Checking in on new highs. As we noted earlier this week, the Nasdaq has made more new all-time highs this year than ever in history. Today on the LPL Research blog we take another look at how 2017 is truly one of the most unique years ever, as there have been a record 27 days that the S&P 500, Dow, and Nasdaq have all closed at a new all-time high, above the previous record of 25 in 1995. Additionally, there have been 177 new combined highs  from the big three indexes this year, with only 195 seen in 1995 higher.

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Click Here for our detailed Weekly Economic Calendar

Friday

  • Monthly Budget Statement (Oct)
  • of Michigan Sentiment (Nov)
  • France: Industrial Production (Sept)
  • Italy: Industrial Production (Sept)

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