AdvisorShares Weekly Market Review – Week Ending 3/10/2017
Highlights of the Prior Week
The Best Week Of The Year!
The title for this week’s update refers to the start of the NCAA basketball tournament with the First Four games Tuesday and Wednesday and then the full slates of games Thursday and Friday. Enjoy the games!
Moving on to markets, by now you know the jobs data on Friday was very strong (although Barron’s did try to rain on the parade with seasonal adjustments), showing 235,000 new jobs in February with the headline unemployment rate at 4.7%. The broader U6 printed at 9.2% which was down 0.2% from last month. The labor force participation rate ticked up to 63.0% which is the highest rate in a year. Wages increased by 0.2% which is fine but not great. The ADP report on Wednesday estimated 298,000 which left participants optimistic for Friday. The mild gain for equities after the NFP may have been due to a strong report already being priced in.
The Ten Year US Treasury Note took the jobs’ strength in stride upticking as the data hit but closing at 2.58% which was down on the day but up ten basis points on the week. As the ten year spent a few minutes during the week above 2.60% we want to circle back to Bill Gross’ comments from last year where he placed great importance on 2.60% as being a point where bad things would ensue for capital markets, and he still feels this way. In mid-December, the ten year also flirted 2.60%, quickly backed off and equities are up almost 5% since then. Jeff Gundlach went after Gross publicly back then, claiming that 2.60% was not a significant pivot. We won’t choose a side based on the fundamentals or personalities but if there is any yield which actually turns out to be a significant pivot, it won’t be the mere touching of that level on some random day or two that makes it significant. For now, it is too early to proclaim Gross as being wrong or right.
But what is right is that the FOMC will be meeting this week and it is difficult to envision a scenario where it does not hike rates. The focus on this meeting is not whether there will be a hike but whether the committee’s post meeting release will be more hawkish than from the past few meetings and if so, how much more hawkish. While we find the GDP numbers to be troubling in the context of raising rates, most other data points are showing strength include those directly tied to the dual mandate of employment and inflation.
Domestic equities were lower across the board last week with the Dow Jones Industrial Average falling 0.47%, the S&P 500 dropped 0.42%, the NASDAQ gave up 0.14% and as something of a recurring theme, the Russell 2000 was the laggard as it fell 2.02%. When small caps lag, it is thought to be a sign of a narrowing market which technically speaking is a negative indicator.
West Texas Intermediate Crude got taken to the woodshed with an almost 9% drop on the week breaking below $50 for the first time since early December. Most of the decline came on Wednesday after yet another week of bearish supply data finally caught up to it. Gold priced in US dollars was down slightly for the week which might be a little surprising given the weakness in equities but the bigger driver might have been the growing acceptance of a rate hike which reduces the chance, probably, that price inflation that gets too hot.
With Article 50 is likely to be invoked as soon as tomorrow, Scotland will again pursue independence, or so says First Minister Nicola Sturgeon. This is still a developing story with more information to come.
One of the unusual aspects of the Snap (NYSE:SNAP) IPO was that the shares issued would not have voting rights. This has prompted an industry trade group to approach index providers S&P Dow Jones and MSCI to petition against the recent IPO from being added to their respective indexes over the voting issue. This will impact many ETFs regardless of which way it goes.
In would-be ETF news, the SEC denied Tyler and Cameron Winklevoss’ attempts to launch a bitcoin ETF, sending the price of the underlying bitcoin down almost 9% in an instant. This of course has been in the works for years and while we don’t know how much actual demand there might be for a bitcoin ETF, the story has been a fun one to watch for ETF wonks.
In what is perhaps one of the greatest barn finds of all time, Fox News reports Ford Mustang Found In Mexican Junk Yard Is From ‘Bullitt,’ Expert Confirms:
Marti was familiar with the vehicle identification numbers (VINs) for the two Mustangs ordered by Warner Bros. for the making of the film. The other is privately owned today and hasn’t been shown publicly in a quarter-century, while the one found in Mexico was long thought lost to history.
Deadspin reports Here Come Big ESPN Layoffs:
ESPN has long believed that the ESPN brand was more important to creating stars than the stars themselves, and has largely been proven right, as the majority of those who have left Bristol have achieved less fame elsewhere. That belief has only been bolstered in the last year, with Fox Sports poaching ESPN leftovers—and winning legitimate bidding wars for Colin Cowherd and Skip Bayless—only to see Fox’s Suicide Squad barely dent the ratings. (Much more worrying is that Fox Sports poached the rights to broadcast the next two World Cups, a growth property, for what is a comically low price in retrospect.)
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, CME Group, ESPN, Reuters, Deadspin, Fox News
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Technology, Healthcare, Staples, Discretionary, and Telecom. The remaining six – Financials, Industrials, Utilities, Materials, Energy, and Real Estate – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.17% for the week ending 3/10/17, with Technology outperforming all, and Real Estate coming in last.
For March 6th, 2017 to March 10th, 2017
As measured by the S&P 500 sector indices, respective performances were: