Investment Commentary –May 2nd, 2017
Market Indices as of Market Close May 2nd, 2017
Dow 20,949 (6.01% YTD)
S&P 2,391 (6.80% YTD)
NASDAQ 6,095 (13.23% YTD)
Gold $1,265 (8.69%)
OIL $47.59 (-15.76%)
US 10Y Treasury 2.29 (-15.41%)
Barclay Bond Aggregate (1.37% YTD)
Wall Street staggers sideways as Apple helps, autos drag
U.S. stocks were little changed on Tuesday as an Apple led rise in the tech sector countered weakness in auto stocks and investors digested a heavy day of earnings reports.
Ford shares dropped 4.2 percent and General Motors fell 2.9 percent, as major automakers posted declines in U.S. new vehicle sales for April.
Apple shares rose 0.5 percent ahead of the iPhone maker’s quarterly results due later on Tuesday.
Investors also were awaiting other significant events later in the week, including Wednesday’s expected statement from the Federal Reserve, which began meeting on Tuesday, and Friday’s U.S. employment report.
The Fed is widely expected to stand pat on interest rates, but may offer hints on the possibility of a rate hike in June.
Despite record highs, fund managers globally remain underweight Apple
Active stock fund managers around the world are holding the lowest percentage of Apple Inc (AAPL.O) shares in their portfolios when compared to the iPhone maker’s overall weighting in indexes, even as the shares hit record highs, according to a research note by investment bank UBS late Monday.
The current positioning by investors suggests Apple stock has room to run as portfolio managers chase performance. This should give Apple more fuel even after it rallied 56.4 percent in the 12 months leading up to Monday’s close.
*Editor’s Note: Apple is among Affinity Asset Management’s largest individual stock holdings across our Moderate to Aggressive investment models.
Market-moving headlines: week ending April 28
FRENCH CATALYST: Results from the initial April 23 ballot in France’s presidential election welcomed in the financial markets, as centrist candidate Emmanuel Macron was seen as having the upper hand heading into the May 7 runoff election against far-right candidate Marine Le Pen. European stocks rallied on Monday, led by a 4.1% gain in a French stock index.
U.S. REACTION: The French results were also viewed favorably in U.S. markets, and the Dow jumped 216 points, adding 1.1%.
GROWTH SLUMP: The U.S. government’s initial estimate of first-quarter GDP was greeted with disappointment on Friday, and stocks slipped. At just 0.7%, quarterly GDP growth was the slowest in three years and trailed the economy’s 2.1% growth rate in last year’s fourth quarter.
CHINA WORRIES: Jitters spread through Chinese financial markets, as a Chinese stock index on Monday posted its biggest daily decline since December. Later in the week, yields on Chinese government bonds climbed to their highest levels in 20 months. Yields rise as bond prices fall.
FED AHEAD: The U.S. Federal Reserve Board is expected to keep interest rates unchanged when it concludes a two-day meeting on Wednesday. At its most recent meeting in mid-March, the Fed lifted its benchmark short-term interest rate by a quarter percentage point, as expected.
LEADERS & LAGGARDS:
This week’s leaders include Healthcare and Technology. Laggards include Basic Materials, Financials and Utilities.
THIS DAY IN FINANCAL HISTORY: Unions Are Born May 1, 1794
On this date in 1794, a group of shoemakers got together to battle for better wages and working conditions. Their first meeting was in Philadelphia and they called themselves the Federal Society of Journeymen Cordwainers.
On tap for the rest of the week:
Monday: Institute for Supply Management’s manufacturing index; construction spending, U.S. Census Bureau; personal income and consumer spending, U.S. Bureau of Economic Analysis
Tuesday: U.S. Federal Reserve Board opens two-day policymaking meeting; vehicle sales, U.S. Department of Commerce
Wednesday: U.S. Federal Reserve Board concludes two-day meeting; Institute for Supply Management’s nonmanufacturing index
Thursday: Trade balance, factory orders, U.S. Census Bureau; Labor productivity and costs, U.S. Bureau of Labor Statistics
Friday: Monthly jobs and unemployment, U.S. Bureau of Labor Statistics; consumer credit, U.S. Federal Reserve
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.
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