The WMA Weekly Market Wrap v. 171114

November 14, 2017

Winning Streaks End

U.S. stock benchmarks closed mostly lower last week, putting an end to multi-week winning streaks by the major indexes as traders expressed nagging anxiety about a possible delay in much-anticipated corporate tax cuts due to major differences between the House and Senate versions of the tax bill. However, some strong corporate earnings results limited the declines and kept the Nasdaq in barely positive territory, supported by strength in semiconductor stocks. As traders grew more defensive during the week, they increasingly favored consumer staples stocks, which saw good gains. Energy stocks were especially strong at the start of the week, after oil prices rose in response to the arrests of numerous Saudi Arabian officials and members of the royal family over the previous weekend. Oil prices fell back a bit later in the week, however, partly due to news of a rise in U.S. oil inventories.

For the week, the Dow fell 0.5 percent while both the S&P and the Nasdaq lost 0.2 percent. Both the Dow and the S&P had risen for eight straight weeks, while the Nasdaq fell off after a six-week rally. All three indexes are hovering near record levels and hit all-time highs during the week. The Russell 2000, meanwhile, rose 0.1 percent on Friday. However, that index of small-capitalization stocks, which is seen as having a higher correlation to the prospects of tax reform, fell a more pronounced 1.2 percent over the week.

In economic news, the personal savings rate falls to a 10-year low while consumer sentiment fell from 100.7 to 97.8, below the 100 level that was expected. The economic calendar was particularly light.

On Thursday, the Senate Finance Committee released its draft tax bill, which differed significantly from the House Republicans’ plan. One key divergence is a proposal to defer implementing a cut in corporate tax to a 20 percent rate from 35 percent until 2019, rather than next year as put forward in the House plan. The two versions of the tax overhaul will be further debated and negotiated before the final vote, of course, and traders seem to be losing faith that the bill will be passed before year-end. The prospect of a major tax plan has been one factor propping up the U.S. stock market recently in that many traders see tax cuts supporting company earnings and boosting the economy.

Traders also followed President Trump’s visit to Asia, where he delivered a strong message on trade, defending economic nationalism and saying the U.S. won’t enter into multilateral deals that “tie our hands.” Speaking at the Asia-Pacific Economic Cooperation summit in Vietnam, the president declared he won’t “let the United States be taken advantage of anymore.”

Asian stock markets closed mostly lower last week, while the major European indexes were lower across the board.

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