WALL STREET SEES ITS FIRST CORRECTION SINCE 2016
On Friday, the S&P 500 settled at 2,619.55, down 5.16% for the week. Thursday, it entered correction territory just nine days after its January 26 record close. The Dow Jones Industrial Average made even bigger headlines last week by taking two 1,000-point drops within four days, the second occurring Thursday.1,2
Last Monday, U.S. equities took their largest single-session fall in more than six years as higher interest rates for bonds and inflation concerns strengthened selling pressure. To add to the anxiety, two of the financial industry’s top ‘roboadvisor’ websites crashed during Monday’s rout, frustrating individual investors. The Dow retreated 5.21% for the week to 24,190.90, while the Nasdaq Composite slid 5.06% to 6,874.49.1,3
SERVICE SECTOR GREW RAPIDLY IN JANUARY
At a mark of 59.9, the Institute for Supply Management’s latest purchasing manager index for the service sector bettered the forecast of analysts polled by Briefing.com, who expected a small climb to 56.7. The index was at 56.0 for December.4
EARNINGS LOOK STRONG
FactSet’s latest analysis of corporate profits shows a 14% Q4 earnings growth rate and a Q4 sales growth rate of 8.0% for the S&P 500. Through Friday, 65% of S&P 500 companies had reported quarterly results.5
A RETREAT FOR CRUDE
Oil also had a poor week, descending 9.6% in five trading days to a Friday NYMEX settlement price of $59.20. It rebounded Friday from an intraday low of $58.07.6
THIS WEEK: Heineken and Loews Corp. announce earnings on Monday. Baidu, Blue Apron, Denny’s, Kemper, MetLife, PepsiCo, Under Armour, Voya Financial, and Weibo present results Tuesday. Investors review January’s Consumer Price Index and retail sales report Wednesday, along with earnings news from Agilent Technologies, Applied Materials, Cisco, Credit Suisse, Hilton Worldwide Holdings, Hyatt Hotels, Marathon Oil, Marriott, Molson Coors, TripAdvisor, and Wyndham Worldwide. On Thursday, the earnings parade includes Avon, CBS, Nestlé, Shake Shack, Sonoco, and Waste Management; reports on initial jobless claims and January wholesale inflation also surface. The University of Michigan’s initial February consumer sentiment index arrives Friday, plus data on January construction activity and industrial production and earnings from Campbell Soup, Coca-Cola, Deere & Co., Enbridge, J.M. Smucker, Kraft Heinz, Ryder Systems, and Vulcan Materials.
| % CHANGE | Y-T-D | 1-YR CHG | 5-YR AVG | 10-YR AVG |
|---|---|---|---|---|
| DJIA | -2.14 | +19.92 | +14.58 | +9.86 |
| NASDAQ | -0.42 | +20.28 | +23.05 | +19.83 |
| S&P 500 | -2.02 | +13.51 | +14.51 | +9.68 |
| REAL YIELD | 2/2 RATE | 1 YR AGO | 5 YRS AGO | 10 YRS AGO |
| 10 YR TIPS | 0.78% | 0.41% | -0.57% | 1.36% |
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
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Citations.
1 – markets.wsj.com/us [2/9/18]
2 – seattletimes.com/business/us-stocks-snap-higher-a-day-after-entering-a-correction/ [2/9/18]
3 – businessinsider.com/betterment-and-wealthfront-crash-during-market-bloodbath-2018-2 [2/5/18]
4 – briefing.com/investor/calendars/economic/2018/02/05-09 [2/9/18]
5 – insight.factset.com/sp-500-companies-with-more-global-exposure-reporting-higher-earnings-growth-in-q4 [2/9/18]
6 – cnbc.com/2018/02/09/oil-falls-below-60-for-first-time-in-2018-on-pace-for-big-weekly-drop.html [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F9%2F17&x=0&y=0 [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F9%2F17&x=0&y=0 [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F9%2F17&x=0&y=0 [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F8%2F13&x=0&y=0 [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F8%2F13&x=0&y=0 [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F8%2F13&x=0&y=0 [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F8%2F08&x=0&y=0 [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F8%2F08&x=0&y=0 [2/9/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F8%2F08&x=0&y=0 [2/9/18]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [2/9/18]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [2/9/18]