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Weekly Market Summary 7th August 2017

7 August 2017 - By Wim Bernards

Weekly Market Summary

This weekly market update provides you with a summary of some of the more important economic and news releases in the market over the last week.

7th August 2017

Last Week

 

Markets​​​​​​

Last week, the S&P was rather flat at -0,2 % and the Nasdaq 
decreased 1.2 %. The Dow Jones had another good week and gained 1.4 %. Gold decreased 0.25 % and Crude went up with 1.5 % for the week. See the chart below.

Dow bull session: What does 22,000 points mean anyway?

From AP: You could say the Dow cruised to 22,000: The blue chip index rose to its latest milestone without much excitement or drama as aerospace giant Boeing and a few other companies did most of the work. Stocks have spent the last five months gradually moving higher, without many big gains or losses. Given the peace and quiet in the markets, it's fitting that a small move – 52 points, all of them essentially from Apple – brought the Dow to its newest milestone.

How did we get here?

Boeing, McDonald's and health insurer UnitedHealth have contributed more than 700 points out of the 1,000 the Dow has gained since March 1, when the index topped 21,000 points for the first time.

Meanwhile Goldman Sachs and IBM, which helped lead the Dow's surge in late 2016 and early 2017, have come crashing back to earth. They're the worst performers on the index this year.

What's a 1,000-point Dow move in 2017?

Not what it used to be. As the index goes higher and higher, each round-number milestone represents a smaller move. When the Dow rocketed from 10,000 points to 11,000 points in early 1999, it was a 10 % leap. The move from 21,000 to 22,000 translates to a gain of just 4.8 %.

With only 30 companies, the Dow reflects much less of the economy than the Standard & Poor's 500 index or the Russell 1500. And Dow points are based on dollars of stock price instead of the relative sizes of companies. So a 1 % move for an expensive stock like Boeing or Goldman Sachs, both priced well above $200 per share, will move the Dow more than Microsoft, worth around $70 per share, or General Electric, at $25 per share, even though investors value Microsoft at more than $550 billion to about $90 billion for Goldman.

The Dow is famous enough to be recognized by a lot of people, and that's a kind of relevance. And for all the arguments about the most precise market indicators, the Dow and S&P 500 have performed about the same this year. As of last Wednesday, the Dow is up 11.4 % for the year and the S&P 500 is up 10.7 %.
 

Bull and Bear Markets

Below is an overview of the various bull and bear markets.

FANG outperformance vs S&P

S&P Information Technology Index

Whereas the Nasdaq Composite compensated for the 2000 – 2002 decline some time ago, the S&P Information Technology Index now passed its previous peak.

Performance per Asset Class

Not everyone is happy.

Source: RCM Alternatives


USA

​​​​​​​July Jobs report​​​​

From Quartz: The US added 209,000 jobs in July, beating expectatins by a comfortable margin. Analysts expected 180,000 new jobs. The unemployment rate fell by a tenth of a percentage pint to 4.3 %, matching its lowest level since 2001. Wages rose 2.5 % – a moderate but decent gain. 

 

 

Wage growth

From The Daily Shot: The Goldman Sachs wage tracker, which takes into account various earnings indicators, shows a meaningful slowdown as well. 

From The Daily Shot: While younger workers saw their annual pay increases improve (on average), wages for those who are 55 and older are growing at the slowest pace in recent decades (light blue line).

 

Eurozone

From Topdown Charts: A falling Eurozone unemployment rate should eventually lead to rising wage growth, and adds to the upside case for inflation in Europe… which ultimately adds to the upside case for global sovereign bond yields.

From Finimize: The eurozone’s economy continues to accelerate and prices are picking up too (a.k.a. inflation). All eyes are now on the European Central Bank’s (ECB) reaction…

Europe’s economic growth has accelerated in 2017: it grew 0.6% in the second quarter according to figures released last Tuesday. That means it’s grown faster so far this year than America has and about twice as fast as Britain. Meanwhile, a key measure of inflation in the eurozone hit a four-year high in June, according to data out last Monday (suggesting people and companies are willing to pay more for products).

Stronger growth and higher inflation make it more likely that the ECB will pare back its extremely supportive policies. Expectations of higher interest rates have already pushed the euro up by 12% versus the dollar this year.


Asia

China

​​​​​​​China's exports

 

Australia

Home Ownership

Home ownership among young people is declining, as mortgage debt almost doubles for the same age group, results from the latest Household Income and Labour Dynamics in Australia (HILDA) survey show. It also shows young people are living with their parents longer.

Some interesting graphs:

 

Amazon Warehouse

From Quartz: Amazon unveiled the location of its first warehouse in Australia. Its massive new fulfillment center will sit just outside of Melbourne, giving struggling brick-and-mortar retailers Down Under even more to worry about. The company said the operation will create hundreds of new jobs.
 

Bitcoin

On 1 August, Bitcoin hard forked.

Morning Brew tells more about it: The “Hard Fork”

That’s the intricate process of splitting Bitcoin into two. And it just happened.
The first coin will remain Bitcoin, while the new currency will be called Bitcoin Cash.


​​​​​​​Let’s refresh. Bitcoin is an electronic currency that offers peer-to-peer online payments. Like handing someone a dollar for a service, I pay you and you pay me. Peel back a layer and we have these people called "miners." A miner acts as the cryptocurrency police, preventing “funny business” with each transaction and getting paid a fee to do so. Once a miner gives a transaction the green light, they store it in a block, a group of transactions that link to form one, long "blockchain." It’s sort of like an accountant keeping a ledger.

But, here’s the thing; Bitcoin is pretty old. Like a decade old. And like any old technology, sometimes it needs to be upgraded. Consider this: Currently, Bitcoin blocks can process 1MB every ten minutes (or seven transactions a second), while payment processors like Visa push through 2,000 transactions a second. And before the Bitcoin craze began, 1MB was enough to get the job done. But, now that grandma Doris is sitting in her rocking chair slinging around bitcoin, that performance won’t fly.

Cue the split. If Bitcoin ever wants to be a widely-accepted method of payment, it’ll need the blessing of governments and institutions. And for that to happen, processing transactions must be seamless. The solution is Bitcoin Cash. Bitcoin Cash, will now be able to process 8MB of transactions per block. Think of it like the jump from 3G to LTE– it’s a big deal. Still, while the split is complete, Bitcoin Cash has a LONG way to go and a lot of opponents standing in its way (but that’s for another time).

 

Crude

​​​​​​​Oil’s share of total global energy demand has been shrinking.

 

 

Shares

Gum and candy companies

From Quartz: The introduction of self-checkout lanes to American supermarkets 25 years ago created a big problem for confectionary companies. The lanes lack shelving for impulse purchases like the bubble gum, mints, and candy bars that typically line the cashier aisles.

Bubble gum sales have declined by more than 40% in the last decade, to $250 million in 2016, according to Euromonitor. The market for chewing gum, in general – which includes bubble gum, mint gums, and sugar-free varieties – sits at $3 billion, down more than 8% over the past decade.

Just wait until more Americans shift to online grocery shopping. The confectionary treats will be out of physical reach, unable to entice shoppers or their nagging children with alluring, technicolor packaging. The prospect already has Hershey’s and its industry brethren working to figure out ways to sell more candy online. Other companies in the packaged-food business, like Campbell Soup Co., are trying to be similarly strategic.

SNAP

From Morning Brew: Monday, Snap shares dropped 5.1% to $13.10 (an all-time low), before rebounding to $13.53. Since Snap’s IPO back on March 2nd, the media company has fallen well below its offering price of $17 a share.
Last Monday marked yet another test for Spiegel & Co: the end of the first lockup period – the time following an IPO in which employees and early investors are prevented from selling shares in a company. Why set a lockup period? Well, in Snap’s case, as shares plummeted from their $27 high, early investors may have been tempted to make off with a quick payday. To prevent this sell-off and minimize price volatility, companies "lockup" their shares. And with Snap’s lockup ending, there was an initial sell-off, but the downward move was only temporary.
That doesn’t mean Snap is in the clear. Investors can opt to sell shares at any point. But hey, at least it survived lockup day better than Twitter: TWTR dropped 18%.

Another bit of bad news for SNAP: it was refused entry into the S&P500. S&P does not want to accept stocks with no voting rights in its S&P500 index. This was the wish of big investors. SNAP IPO-ed with non-voting stocks, which will put pressure on its price.

Apple

From Quartz: Apple’s third-quarter results trounced expectations. The world’s most valuable publicly traded company posted net income of $8.72 billion and revenue of $45.4 billion. It said it’s now sold 1.17 billion iPhones, and dispelled rumors of a delayed launch for its next version.

From Finizime: Its stock price jumped more than 5% to a new record high. Apple’s results for the most recent quarter were not viewed as particularly important as all eyes are on its new phone, which is set to be released in September. Amid rumors of production delays, Apple said it expects to make more revenue in the July-September quarter than Wall Street was expecting – suggesting the release is on schedule. 

Tesla

From Quartz: Tesla results were better than expected. The company posted a net loss of just over $400 million, compared to $293.2 million a year earlier, ahead of analyst projections. Revenue more than doubled to $2.79 billion from $1.27 billion, on higher sales of its Model S and Model X vehicles.

 

Miscellaneous

Investing Habits

I just think that Millennials just want to spent the money before the 10 years are over…

 

Medieval Cities

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Next week's Economic Agenda

Source: tradingeconomics.com

 

Trade idea of the week

You can find this idea here.

If you want to create your own charts and share your ideas, click here.

 

Summary of Autotrade Performance MT4

System of the week

For a full overview click here.

 

Summary of Autotrade Performance MT5

System of the week

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Wim Bernards

Wim Bernards peruses the media on financial and world affairs. Every month, he describes the things he finds interesting from an investor's point of view. This can range from macro-economics to micro-economics and everything in between. Sometimes, he may sidestep to behavioral finance, politics and other areas the reader may find interesting. However, he doesn't aim to be all inclusive; he just aims for an interesting monthly read.