Markets: The market rallied again this week, with the Dow Jones, the S&P 500, and the Russell 2000 all making new all-time highs, as hopes were rekindled for tax cuts/reform. The S&P 500 rose 1.2%, hitting a sixth consecutive record high before falling on the final day. At 19 times forecast earnings, the index trades near the highest valuation since the dot-com era.
Dividend Stocks Update: These high dividend stocks go ex-dividend this coming week: City Office (NYSE:CIO), PennyMac Mortgage Investment Trust (NYSE:PMT), ARMOUR Residential REIT Inc (NYSE:ARR), Five Oaks Invst (NYSE:OAKS), Sabine Royalty Trust (NYSE:SBR).
Volatility: The VIX rose 1.4% this week, and finished at $9.65.
Currency: The US Dollar Index rose vs. most major currencies this week.
Market Breadth: 27 of the DOW 30 stocks rose this week, vs. 14 last week. 72% of the S&P 500 rose, vs. 69% last week.
Economic News: “The US lost 33,000 jobs in September, marking the first decline since 2010 as U.S. began to dig itself out from the Great Recession. Yet the decline was entirely due to widespread workplace disruptions caused by hurricanes Irma and Harvey. The industry hurt the most was the restaurant business. Employment fell by a whopping 105,000. The unemployment rate, meanwhile, fell to 4.2% from 4.4% and hit the lowest level since December 2000. The jobless rate was not affected by the storms, the government said.
Wages rose 0.5%, or 12 cents, to $26.55 an hour, likely reflecting a hurricane-induced bump. Over the past 12 months hourly pay increased by 2.9%, up from 2.7% in the prior month and matching a post-recession high.
The government raised its estimate of new jobs created in August to 169,000 from 156,000. Julys gain was reduced to 138,000 from 189,000. The retail sector has lost jobs for eight months in a row, and ten of the last 12 months. The latest data from the Labor Department shows the retail sector lost 2,900 jobs in September, after a 7,300-job loss in August and 10,800-position nosedive in July. In 2017, the retail industry has lost about 72,000 jobs.
Some industries have benefited from retails malaise over 62,000 new transportation and warehouse jobs have been created in 2017.
Week Ahead Highlights: Q3 Earnings season starts this week, with many major Financial companies reporting, such as JPMorgan (NYSE:JPM), CitiGroup, Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC), among others.
“If stocks anticipate profits, investors clearly expect something big when companies start reporting results next week. The S&P 500 Index has climbed 3.6 percent in a month, the best pre-earnings season in five years. But don't tell that to Wall Street analysts, who have cut their estimates for S&P 500 income growth by more than half. At 3.6 percent, they're now predicting the biggest slowdown since 2011 after profits expanded about 11 percent in the March-June quarter.”
“While analysts always lower their expectations heading into earnings season, the 4.9 percentage-point reduction is almost double the average cut in the past year. All 11 industries suffered downward revisions, with financials and consumer discretionary seeing growth estimates going from positive to negative.
Insurers are likely to report a 41 percent drop in profits as costs surged during the deadly storm season. Automakers and airlines may see income contracting more than 9 percent because of lost business during the natural disasters.” (Source: Bloomberg)
Next Week’s US Economic Reports: There will be multiple consumer-based reports due out next week, in addition to several Housing reports.
Sectors: Telecoms and Financials led this week, with Energy and Staples trailing.
Futures: Natural Gas futures and Crude Oil WTI Futures both fell 4.7% this week.
