Highlights of the Prior Week
Are FOMC Members Losing Hope?
The monthly jobs report was of course a disappointment with the headline number of just 160,000 jobs created with the previous two months being revised down by a collective 19,000. The unemployment rate held at 5.0% but the broader U6 did down tick to 9.7%. Wages went up 0.3% which is a positive but the labor force participation rate dropped 2/10ths to 62.8%.
Last week in this report we posited that the Fed might have been setting the table for no rate hikes this year and while that remains to be seen, this jobs report supports the thesis. Even further to the point, Bespoke Investment Group reports that four FOMC members all spoke at the Hoover Institute on Thursday night with the takeaway being "4 Fed speakers, 0 Fed optimism."
As earnings season is now winding down Bespoke shows 61% of companies beating on the bottom line and 55% beating on the top line. They also report that the average company stock has dropped 0.21% on the day it announces its earnings. Barron's cited FactSet in noting that earnings are expected to show a decline of 7.1% for the first quarter.
After a promising start to the week with gains on Monday, domestic equities rolled over into modest losses across the board. The Dow Jones Industrial Average fell 19 basis points, the S&P 500 dropped 0.39%, the NASDAQ was off 0.83% while the Russell 2000 gave back 1.48%.
The economic story in Europe continues to struggle. Retail sales declined 0.5% and the PMI Purchasing Managers' Index also fell. Additionally, GDP estimates for 2016 were revised down to 1.6% which would be a slight decline versus 2015.
For the second week in a row, all the foreign equity markets we regularly follow for this report were all lower except for Australia which was up 0.71%. The DAX was down 1.68%, the FTSE 100 dropped 2.93% the CAC 40 fell 2.89%, Shanghai and Hong Kong each had four day weeks giving up 83 basis points and 4.54% respectively and the Nikkei 225 was only open for two days and fell 1.52%.
The yield on the Ten Year US Treasury Note fell four basis points on the week to 1.77% but interestingly rose slightly on Friday in the face of the dovish jobs report. The yield on the German bund essentially cut in half down to 0.14%, the French OAT now yields 0.52%, the gilt yield in the UK fell 18 basis points to 1.41%, the Swiss ten year yield also fell coming in at -0.29% and JGBs now charge lenders 11 basis points.
Rounding up commodities; West Texas Intermediate Crude was down 2% and gold fell slightly after flirting with $1300 early in the week.
ETF News & Data
There were three new funds launched last week including the Global X Millennials Thematic ETF which seeks to benefit from the spending habits of the millennial demographic. Holdings include social media companies, internet retailers and apartment REITs.
The aftermath of Prince's death is becoming increasingly complex on two fronts; the circumstance surrounding his death and what will become of his estate. CNN offers a recap up through the end of last week but stay tuned for more;
It's hard to imagine that Prince gave no thought to the fate of his estate, yet no one seems to know what he wanted because they can't find a will. Prince was worth $300 million, according to various estimates, and his estate is expected to grow as sales of his music continue to explode.
While very few college athletes go on to have lucrative athletic careers in the US, there of course have been many Americans who go to play overseas and in the womens basketball, the foreign leagues can be far more lucrative. ESPNW investigates with Lost And Found In Russia;
For Griner, and for Taurasi when she was younger, playing in Russia is a "life experience" -- a lesson in how to handle change, challenge and cultural differences. And perhaps nothing defines the yearlong existence of WNBA players more than those hurdles. As soon as they leave college, they exist in a perpetual state of motion. For five months, they live in the U.S., playing during the summer (a season few associate with hoops), making an average salary of $76,500. (Low-level rookies make less than $40,000, the very best players about $109,500.) That's a decent, but not overwhelming, amount of money for a professional athlete, and because the rest of the year is wide open, about half the WNBA players go overseas for a second paycheck, from Italy to Turkey to Russia. They are like modern-day nomads: Have jumper, will travel.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, ESPNW, CNN
For May 2nd, 2016 to May 6th, 2016
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark - Staples, Utilities, Technology, Discretionary, and Telecom. The remaining five - Financials, Healthcare, Industrials, Materials, and Energy - each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.69% this week, with Staples outperforming all, and Energy coming in last.
For May 2nd, 2016 to May 6th, 2016
As measured by the S&P 500 sector indices, respective performances were:
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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