Market Update: Monday, December 4, 2017

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Market Recap

  • Major U.S. indexes closed lower Friday, but finished mostly higher for the week. Nasdaq underperformed as trades shifted from growth to value. S&P 500 Index -0.2%, Dow -0.2%, Nasdaq -0.4%.
  • Telecommunications, energy led; industrials, materials lagged.
  • Positive breadth (1.1:1) on NYSE; relatively high volume (~115% of 30-day avg.).
  • 10-year note yield +5 basis points (+0.05%) to 2.36%.
  • Commodities – WTI crude oil +1.7% to $58.35/bbl., COMEX gold +0.5% to $1283/oz.
  • Fairly light week for domestic economic data releases; attention will focus mostly around tax reform news/progress and the Flynn investigation.

Overnight & This Morning

  • Domestic stocks opened higher, tax overhaul traction main driver.
  • European equities broadly advancing mid-day. STOXX Europe 600 +0.7%, FTSE 100 +0.7%, DAX +1.1%, CAC 40 +0.9%.
  • Asian markets mixed despite light news flow. Major indexes fell in sympathy with U.S. Friday drop but bounced late-session as domestic index futures jumped. Nikkei -0.5%, Hang Seng +0.2%, Shanghai Composite -0.2%.
  • Commodities – Crude pulling back (-0.6% to $57.74/bbl.), gold sliding -0.4% to $1277/oz., industrial metals mixed.
  • 10-year note yield continuing higher; yields +3 basis points (+0.03%) to 2.39%.

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Macro Notes

  • Tax overhaul momentum is the widely cited driver for today’s strength. Senate passed its legislation early Saturday morning, and while merging the House and Senate bills will be complicated, a number of reports have suggested that Republicans are likely to be more flexible given their widely discussed need to secure a major legislative victory. The good news for Republicans is that the bills share many important elements, particularly in terms of their outsized focus on reducing the corporate tax burden by lowering the corporate tax rate from 35% to 20%. The two bills also eliminate the state and local tax (SALT) deduction. However, there are a number of important differences that still have to be resolved, with process complicated by the need to secure a government funding deal and the constraints of Senate budget rules. (Source: FactSet)

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Monday

Tuesday

  • Trade Balance (Oct)
  • Markit Services PMI (Nov)
  • ISM Non-Manufacturing (Nov)
  • Eurozone: GDP (Q3)
  • Eurozone: Retail Sales (Oct)
  • Italy: Markit ADACI Services PMI (Nov)
  • France: Markit France Services PMI (Nov)
  • Germany: Markit Germany Services PMI (Nov)
  • Eurozone: Markit Eurozone Services PMI (Nov)
  • Australia: GDP (Q3)
  • BOJ: Masai
  • Bank of Canada: Rate Decision

Wednesday

  • MBA Mortgage Applications (Dec 1)
  • ADP Employment Change (Nov)
  • Nonfarm Productivity (Q3)
  • Unit Labor Costs (Q3)
  • Germany: Factory Orders (Oct)
  • Japan: Buying Foreign Bonds (Dec 1)
  • China: Foreign Reserves (Nov)

Thursday

  • Challenger Job Cuts (Nov)
  • Weekly Jobless Claims (Dec 2)
  • Household Change in Net Worth (Q3)
  • Consumer Credit (Oct)
  • Germany: Industrial Production (Oct)
  • France: Trade Balance (Oct)
  • Italy: Unemployment Rate (Q3)
  • Bank of Italy: Report on Balance Sheet Aggregates
  • Japan: GDP (Q3)
  • Japan: Leading Index (Oct)
  • Japan: Eco Watchers Survey (Nov)
  • China: Trade Balance (Nov)
  • China: Imports & Exports (Nov)

Friday

  • Change in Nonfarm, Private & Manufacturing Payrolls (Nov)
  • Unemployment Rate (Nov)
  • Average Hourly Earnings (Nov)
  • Average Weekly Hours (Nov)
  • Labor Force Participation & Underemployment Rates (Nov)
  • Wholesale Inventories (Oct)
  • Wholesale Trade Sales (Oct)
  • Germany: Trade Balance (Oct)
  • Germany: Current Account Balance (Oct)
  • Germany: Imports & Exports (Oct)
  • France: Industrial Production (Oct)
  • UK: Industrial Production (Oct)
  • UK: Trade Balance (Oct)
  • UK: Nat’l Institute of Economic & Social Research GDP Estimate (Nov)
  • BOE: Inflation Next 12 Months
  • China: CPI & PPI (Nov)

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

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