November 2017

Market Recap

The Dow soared over 300 points on the last day of November to close above 24000 for the first time in its history. Hopes for a tax overhaul may have contributed to investor confidence in equities. Each of the benchmark indexes listed here posted favorable monthly gains. The Nasdaq continued its strong performance in 2017, gaining over 2.0% in November, while the small caps of the Russell 2000 climbed close to 3.0%. After gaining 2.8% for November, the S&P 500 joined the Dow in posting its eighth consecutive month of positive returns. With stocks climbing, it’s not surprising that long-term bond prices fell, as evidenced by the yield on 10-year Treasuries, which jumped 4 basis points over October’s end-of-month yield.

 

Economic headlines
  • Employment: Total employment rose by 261,000 in October following September’s job reduction. The unemployment rate edged down to 4.1%. The number of unemployed persons declined by 281,000 to 6.5 million. Since January, the unemployment rate has declined by 0.7 percentage point, and the number of unemployed persons has decreased by 1.1 million. The labor participation rate decreased by 0.4 percentage point to 62.7%. The average workweek for all employees remained at 34.4 hours in October. Average hourly earnings fell by $0.02 to $26.53 after rising $0.12 in September. Over the 12 months ended in October, average hourly earnings have risen $0.63, or 2.4%.
  • FOMC/interest rates: The Federal Open Market Committee met at the end of October and left the target federal funds rate range at 1.00%-1.25%. However, some economic indicators are showing mild inflationary pressures, which, when coupled with a labor market that could be nearing full employment, may lead to another interest rate hike when the Committee next meets in mid-December. The FOMC may be under new leadership, as President Trump nominated Jerome Powell to succeed Janet Yellen as Fed chairperson.
  • GDP/budget:The second estimate of the third-quarter gross domestic product showed expansion at an annual rate of 3.3%, according to the Bureau of Economic Analysis. The second-quarter GDP grew at an annualized rate of 3.1%. Gross domestic income, which estimates all income earned while producing goods and services, increased 2.5% in the third quarter compared to an increase of 0.9% in the second quarter. As to the government’s budget, October marked the beginning of fiscal year 2018. The deficit for October was $63.24 billion ($45.83 billion in October 2016). The federal deficit for FY 2017 was $665.7 billion, more than $80 billion, or 13.7%, higher than the 2016 deficit.

 

Eye on the month ahead
December should be a good month for consumer spending on the heels of robust consumer sales on Black Friday and Cyber Monday. While trading usually slows during December, stocks are expected to close the year ahead of their 2016 values.

 

Source: Forefield Financial Communications.

Notes: The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.