AdvisorShares Weekly Market Review – Week Ending 5/8/2015
Highlights of the Prior Week
The non-farm jobs report was remarkably close to the consensus estimate. Last week we noted Barron’s calling for 212,000 with the actual print coming at 223,000. As the title of this post implies, on the surface it looks like a Goldilocks number. Fed Governor Charles Evans talked during the week (before the report) and said that this number would need to be at least 200,000 to even consider hiking rates this year. Of course it was greater than 200,000 but not so much greater that it puts a June rate hike back on the table.
There were no real surprises in the report. The headline unemployment rate came in at 5.4%, the broader U6 unemployment rate down ticked to 10.8%, hourly earnings were a slight disappointment with an increase of 0.1% and the labor force participation rate stayed in the neighborhood it has been in for months at 62.8%. There was a surprise in the revisions. As weak as the March data was, remember it was 126,000, it was revised down to 85,000 new jobs.
Domestic equities had a bumpy ride to a flat finish. The Dow Jones Industrial rose 91 basis points, the S&P 500 had a 0.36% lift, the NASDAQ lost five basis points and the Russell 2000 was up 0.54%. Markets were down 1.5-2% through late Wednesday, rallied on Thursday and followed through higher on Friday.
Foreign equities had more pronounced moves for the week. The DAX in Germany rallied 2.23%, the FTSE 100 gained 93 bp and the CAC 40 in France gained 65 bp. After a torrid first four months, Shanghai cooled its heels last week with a 5.29% decline. The Hang Seng gave back 1.93%, the Nikkei 225 fell by 3.19% and Australia dropped 3.09%. Asian markets appear to have been most influenced by ongoing threats to Chinese GDP growth.
Global bond yields continued to back up. The US Ten Year Treasury closed the week up four basis points at 2.15% but before the jobs report on Friday it got as high as 2.24% on Wednesday.
A couple of weeks ago we observed growing sentiment that the German bund would soon trade with a negative yield and of course that has not been the case. Shortly after Bill Gross called the bund the short of the century the yield began to skyrocket, closing this past week at 0.54% after closing the week before at 0.37%. The yield on the French OAT jumped 19 basis points to 0.84%, the Swiss ten year moved a little further from negative territory to close with a positive nine basis point yield, Spain now yields 1.67% and Italy yields 1.68%.
On the commodity scene, West Texas Intermediate Crude was up 5.7% mid-week, above $60 before settling Friday at $59.47 which was a gain of 66 basis points on the week. Gold was less volatile in tacking on 0.42%. In currencies the euro continued its march back against the US dollar but did back off a little over a penny from the mid-week high. The British pound had a large 2% lift against the dollar with most of that coming on Friday after Prime Minister David Cameron won his reelection. The dollar did manage a modest gain against the yen.
Finally, Uber is looking for a round of funding that would value the company at $50 billion. It is a great service but that valuation puts it line with the country’s two largest chemical companies.
ETF News & Data
There were two new ETFs launched last week including a factor,currency hedged, foreign equity ETF from PowerShares. The factor used, beyond the currency hedging is low volatility.
The inflows leaders list was dominated by bond funds and foreign equity ETFs while the outflows came from broad based domestic equity ETFs and a combined $1.9 billion coming from the two large high yield bond index funds.
It turns out that parody media site The Onion is a real media company with ads and technology, very interesting technology. The Atlantic reports that The Onion Is No Joke.
The Onion, as anyone who reads it will tell you, mines humor out of media trends. In recent years, though, the company has turned that formula on its head to finance itself. As the site lampooned sponsored content with a characteristically sharp eye, its corporate overseer, Onion Inc., set in motion a plan to beat media companies at the same game.
Baseball fans of course are very familiar with the overwhelming talent from many Latin American countries including Venezuela which produces the second most Latin players after the Dominican Republic. The Wall Street Journal reports Why MLB Teams Are Fleeing Venezuela.
One incident cited by baseball executives as a turning point occurred about a decade ago at the Mariners’ academy. Though the facility is far removed from crime-ridden cities, a group of roughly half a dozen gunmen stormed the grounds and robbed the staff and players. No one was hurt, but for many MLB teams, the gunpoint holdup was a harbinger of the changes that drove them from the country.
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, Bespoke Investment Group, ESPN
Weekly ETF Flows
For May 4th, 2015 to May 8, 2015
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Financials, Healthcare, Staples, Materials, and Industrials. The remaining five – Discretionary, Technology, Utilities, Energy, and Telecom – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.16% this week, with Financials outperforming all, and Telecom coming in last.
For May 4th, 2015 to May 8th, 2015
As measured by the S&P 500 sector indices, respective performances were: