August 18, 2017 Weekly Market Recap

Wall Street had a disappointing week, its second in a row, as investors continued to drag the major U.S. indices from their all-time highs. The Dow, the S&P 500, and the Nasdaq finished with losses of 0.8%, 0.7%, and 0.6%, respectively, while the small-cap Russell 2000 underperformed (-1.2%), dropping to its flat line for the year.

The week’s most notable headlines in chronological order:

• Monday – S&P 500 +1.0%, Nasdaq +1.3%, Dow +0.6%
  • Investors breathed a sigh of relief after a quiet weekend in regards to North Korea
• Tuesday – S&P 500 -0.1%, Nasdaq -0.1%, Dow unch
  • North Korea decided against executing last week’s threat to launch missiles towards the U.S. territory of Guam
  • July Retail Sales came in hotter than expected (+0.6%)
• Wednesday – S&P 500 +0.1%, Nasdaq +0.2%, Dow +0.1%
  • President Trump ended his Manufacturing Council and Strategy & Policy Forum following the departure of several CEOs
  • The FOMC minutes from the July meeting showed concerns about softer than expected inflation readings
• Thursday – S&P 500 -1.5%, Nasdaq -1.9%, Dow -1.2%
  • Rumors that NEC Director Gary Cohn plans to resign circulated; the White House said the rumors are false
  • Terrorist attacks in Spain killed 14 and left more than 100 injured
• Friday – S&P 500 -0.2%, Nasdaq -0.1%, Dow -0.4%
  • President Trump fired White House Chief Strategist Steve Bannon
  • The SPDR S&P Retail ETF (XRT) settled at its worst level since February 2016 following this week’s batch of earnings

Thursday’s session was perhaps the most notable of the week as the S&P 500 registered its second-worst performance of the year. The major indices opened Thursday’s session with modest losses, but moved deeper into negative territory following a rumor that President Trump’s chief economic advisor Gary Cohn plans to resign from his position following the president’s controversial comments regarding last weekend’s events in Charlottesville, VA. The White House later declared that the rumor was “100% false”, but it did little to reverse the market’s downward trend.

Those concerns eased a bit on Friday after President Trump fired White House Chief Strategist Steve Bannon, a decision that was well received by the market. Mr. Bannon was the chief executive of Mr. Trump’s presidential campaign and has been described as a polarizing figure within President Trump’s inner circle. To some, in the absence of Mr. Bannon, the thinking is that the president might dial back his rhetoric a bit, making it easier for the White House to work with Congress in passing the president’s pro-growth agenda.

Following this week’s events, the fed funds futures market now points to the March 2018 FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 51.5%. Last week, the market expected the next rate hike to occur in June 2018 with an implied probability of 57.5%.

Source: Briefing Investor