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Week in Review

Week Ending: Friday, November 10, 2017

Recap & Commentary

U.S. equities ended the week lower, pulling back Thursday after the Senate tax plan was released. Small companies took a harder hit than their larger counterparts, as they are viewed as bigger beneficiaries of a tax overhaul.

Senate Republicans released their vision for a tax-cut plan on Thursday, diverging in some key ways from a bill drafted by House Republicans. The House plan would consolidate the current seven individual tax brackets to four, while the Senate would maintain the seven brackets, with lower rates for most brackets. The threshold for exclusion for the estate tax would be doubled under the House Bill, and eventually repealed in 2025. Under the Senate plan, the estate tax threshold would be doubled, but with no plan for repeal. The corporate tax rate would be cut from 35% to 20% under both plans; the House calls for the cut in 2018, while the Senate plan would delay the cut until 2019. These, among other differences, will need to be resolved before a bill is passed into law.

President Trump attended the 21-country Asia Pacific Economic Cooperation (APEC) meeting last week, which proved to be a somewhat combative summit between the U.S. and its Pacific partners. Mr. Trump and Chinese President Xi Jinping laid out dueling remarks at the summit, Trump delivering a vision for country-to-country bargaining between the U.S. and Asia, stating that he will “make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and will abide by the principles of fair and reciprocal trade.” Chinese President, Xi, on the other hand, praised multicountry treaties.

457 S&P 500 companies (91%) have reported third quarter earnings as of Friday, 74% of them beating earnings estimates. Similar to last quarter, the market has rewarded positive earnings surprises less than average, and punished negative surprises more, due in part to hesitation from investors to push already high valuations even higher.


Economic Bullet Points

The consumer had a strong week, as reported by consumer credit and sentiment. Consumer Credit rose ahead of expectations in the month, with contributions from both revolving and non-revolving credit. Revolving credit, where credit-card debt is tracked, rose sizably in the month after a strong gain last month as well. Non-revolving credit, which tracks auto and student loan financing, also jumped in the month. Both of these suggest strength for consumer spending.

Preliminary Consumer Sentiment for November edged down slightly from October’s reading, but remains elevated, still the second highest reading since January. Both the current conditions and consumer expectations components were lower, but the losses were small. Favorable trends in prospective jobs, wages, inflation and interest rates were all positives in the report.

Jobless Claims rose slightly in the week, but the more stable 4-week moving average was its lowest since March 1973. Aside from hurricane related uncertainty in Puerto Rico, the labor market remains tight and strong.  


Of Note

  • On Thursday, the S&P 500 fell –1.1% intraday before recovering to close down just -0.4%. In doing so, the index extended its streak of days without a pullback of 0.5% or more to 47, the longest stretch since 1965.


Market Indices Week of 11/10

S&P 500                    -0.2%

Russell 2000             -1.3%

MSCI EAFE              -0.4%

MSCI EM                    0.2%

Commodities            0.5%

Barclay’s Agg.           -0.4%

US Dollar Index        -0.6%

10-Yr Yield                   2.41%

Oil ($/bl)                          $57

Gold ($/oz)                 $1,284


The Week Ahead

  • Empire State Mfg. Survey
  • Philly Fed Business Outlook
  • Industrial Production
  • Producer Price Index
  • NFIB Small Bus. Optimism
  • Housing Market Index
  • Housing Starts
  • Retail Sales
  • Consumer Price Index
  • Jobless Claims

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