Weekly Economic Summary - 2/5/2018Submitted by Miller Financial Group, LLC on February 5th, 2018
U.S. stocks are on the decline this morning following a volatile session on Friday that sent stocks tumbling. Both the Dow and S&P500 finished last week with declines of 2.5% and 2.1% - the largest single day drop for stocks since September 2016. That downward trend is continuing in early trading this morning.
The selloff on Friday was jump started by a strong jobs report which investors viewed as an indicator that the Federal Reserve would accelerate their path toward interest rate normalization. Global stocks are joining in the selloff today with red numbers across the board in Europe and Asia. In the US, the selloff has been broad in nature, with 10 of the 11 sectors in the S&P500 showing losses Monday. Despite the losses in the past two days the major indices are still up 2% on the year.
News from the Fed has been a market driver in this current decline and may continue to be a factor this week. On Friday, the Fed announced that it was restricting growth of Wells Fargo until the bank can show progress in the areas of governance and controls. That move sent Wells Fargo stock tumbling on Friday and has hit the financials stocks early in trading Monday. Today marks a change in leadership for the Fed with new Fed chair Jerome Powell being sworn in today.
Bond prices continue to erode as yields continue to rise. The 10 yr. treasury yield reached 2.85% Monday, a level not seen in over 4 years, signaling the long end of the curve is beginning to drift higher.
The lone economic report out today is the IHS Markit purchasing managers index for services, which decreased to 53.3 in January from 53.7 in December. Gold prices are on the rise today while oil is declining.
Portfolio composition and risk management are the keys in a market like this. We feel confident in our current mix of assets and feel well positioned for a return of volatility in 2018.
Have a great week!