Friday’s market close represents the end of the first half of 2017, and believe or not, it also means that we are now 75% of the way through the current decade.

Despite the S&P500 only being down 20 points, or 0.8%, we saw some very significant events during the last week.  First and foremost, both Janet Yellen, chairwoman of the US Federal Reserve Bank Board of Governors, and Mario Draghi, President of the European Central Bank, made very bullish (positive) comments about the state of the U.S. and European

Mario Draghi & Janet Yellen both had positive things to say about the state of U.S. & European Markets

markets.   This caused increased volatility in the currency markets.  The U.S. dollar hit 1 year lows against the Euro – this weaker U.S. dollar means that the cost of items priced in Dollars becomes more expensive.   Most commodities, as well as the U.S. stock market, are priced in U.S. dollars. Thus, the weaker dollar should have a positive price impact on those commodities and markets.  While an increase in stock market prices is typically a good thing for investors,  it may not be healthy for the move higher to be based solely on currency movements in lieu of fundamentals.  In order to maintain a sustainable market trend we need the currency movements (i.e. the volatility) to settle down a bit.

The aforementioned currency movements caused some interesting changes in U.S. bonds.  The U.S. 10 year Treasury bond yield rose from 2.14% to 2.30%, a change of nearly 7.5% on the bullish commentary.  Despite the increase in yield, the spread (the difference in yield) between 10 year and 30 year bond yields remained relatively unchanged.  This is significant since the spread between long-dated and short-dated bonds, often referred to as the “yield curve”, is something that market analysts and economists use to try and predict recessions.  Because the yield curve remained relatively unchanged, we don’t really have any new information regarding the probability of an upcoming recession.  Based on this, we will continue to keep an eye on the yield curve as well as provide commentary on it.

Technology Dip & Retail Rise

The technology sector lost its recent momentum with the SPDR Select Sector Technology ETF ($XLK) down 3.3% during the course of the week.  There were some noticeable declines in the ‘FANG’  stocks – Facebook ($FB) lost 3.37%, Apple ($AAPL) was down 2.14% and Netflix ($NFLX) and Google ($GOOGL) were down 5.90% and 6.09%, respectively.  We saw a similar sell-off in the iShares Nasdaq Biotech ETF ($IBB) which was down 3.5%.  The sell-off in these two sectors came as we witnessed renewed life in two of worst YTD performing sectors, Financials and Retail see last week’s market update for additional information. 

Nike ($NKE) rose an astounding 11.4% following the announcement of their partnership with Amazon ($AMZN).

The SPDR Select Sector Financials ETF ($XLF) rose 3.04% owing to the rising rates as well as the positive 
outcome of the recent bank stress tests that will allow banks more flexibility in increasing their dividend payments and buyback plans.

The SPDR S&P Retail ETF ($XRT) increased by nearly 3% on the back of impressive earnings from the #1  maker of athletic shoes and sports apparel, Nike ($NKE).  Having announced a deal with Amazon ($AMZN) to sell their shoes direct to consumer via Amazon’s online market place, Nike ($NKE) rose an astounding 11.4% which accounted for a large  portion of the Retail ETF’s gains.  We will continue monitoring the various market sectors to see if this rotation  into underperforming areas continues.

Just a reminder that U.S. markets will be closing early on Monday July 3rd.  They will remain closed on Tuesday in observance of the 4th of July holiday, and reopen on Wednesday July 5th.

If you would like to learn more about how we can help you participate in the markets while striving to protect your assets in the event of a downturn, please attend one of our upcoming seminars or reach out to us directly.

 

Major Earnings for the Upcoming Week (tickers are listed with a “$” preceding them)

 

Monday:

Stock, Bond, and Options markets close early (1pm EST / 12pm CST)

Tuesday:

Markets and Banks closed in Observance of Independence Day

Wednesday (Markets open at normal time):

After Close – Miller Herman Inc. ($MLHR), Price Smart Inc. ($PSMT), Yum China Holdings ($YUMC)

 

Economic Releases (7/3– 7/7)

 

Monday:

9:00 am CT –ISM Manufacturing PMI

9:00 am CT – Construction Spending

ALL Day- Monthly Vehicle Sales

Stock, Bond, and Options markets close early (1pm EST / 12pm CST)

Tuesday:

Markets and Banks closed in Observance of Independence Day

Wednesday:

9:00 am CT – Factory Orders

1:00 pm CT – FOMC Meeting Minutes

Thursday:

7:30 am CT – Weekly Jobless Claims

7:30 am CT –Trade Balance

8:45 am CT – Final Services PMI

9:00 am CT – Fed’s Powell Speaks

9:00 am CT – ISM Non-Manufacturing PMI

10:00 am CT –Crude Oil Inventories

Friday:

ALL Day- G20 Meetings

7:30 am CT – Unemployment Rate

7:30 am CT – Average Hourly Earnings

9:30 am CT –Natural Gas Inventories

10:00 am CT –Fed Monetary Policy Report

12:00 pm CT – Baker Hughes Rig Count

Disclaimers and Disclosures

Investing Risks:  The risk of loss from investing in securities (stocks, ETFs, mutual funds, etc.), bonds, options, futures, and forex or related products, can be substantial.  Investors must consider all relevant risk factors, including their own personal financial situation, before investing.  

Investments in bonds and fixed income products are subject to various risks (including liquidity, interest rate, financial, and inflation risks) and special tax liabilities.  

Options Risks:  Options involve risk and are not suitable for everyone.  Options Trading privileges are granted at the account level by your custodial broker and are subject to review and approval.  Not all accountholders will qualify.  Before trading options, a person must receive a copy of Characteristics and Risks of Standardized Options. Individuals should not enter into options transactions until they have read and understood the risk disclosure document, Characteristics and Risks of Standardized Options, which can be found on our website www.mscm.net.  Copies may be obtained by contacting your broker or the Options Clearing Corporation.

Spreads, Straddles, Strangles, and other multi-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return.  These are advance option strategies and often involve greater risk, and more complex risk than basic options trades.  

Portfolio Margin:  A portfolio margin account generally permits greater leverage in an account, and greater leverage has the potential to create greater losses in the event of adverse market movements.  Portfolio Margin, or Risk-Based Margin, is a margin methodology that sets margin requirements for an account based on the greatest projected net loss of all positions in a “security class” or “product group” as determined by the custodial brokers theoretical pricing model using multiple pricing scenarios.  These pricing scenarios are designed to measure the theoretical loss of the positions given changes in both the underlying price and implied volatility inputs to the model.  Clients participating in portfolio margin will be required to sign an agreement acknowledging that their security positions and property in the portfolio margin account will be subject to the client protection provisions of Rule 15c-3 under the Securities Exchange Act of 1934 and the Securities Investor Protection Act.  Clients will be subject to minimum equity requirements by not only the custodial broker but also the managing firm.

General Disclosures:  Any strategies discussed in this presentation, including examples using actual securities and price data, are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell specific securities or strategies.

Investors should carefully consider the investment objectives, risks, charges, and expenses before investing in any investment product.  To obtain a prospectus containing this type of information as well as other important information, contact your custodial broker.  Please read the prospectus carefully before investing.  

You should discuss any/all implications of investing in such products with your custodial broker, financial adviser/advisor, and/or tax advisor.  Past performance is not indicative of future results.  

Third Party Information:  This presentation may utilize or refer to third party data.  In such a case, let it be known that MSCM, LLC. does not control, nor has it developed the content being referred to, and does not make any warranty, express or implied, as to the accuracy, usefulness, timeliness or even the continued availability or existence of said information/content created or maintained by others.  Opinions expressed by others are not necessarily those of MSCM, LLC., nor does MSCM, LLC. endorse, warrant, or guarantee products, services or information described or offered by such firms.