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Weekly Vantage Point | Week of 8.8.2016

Stocks End Week at All-Time High

August 8, 2016 – U.S. stocks surged Friday as strong July jobs data, the second consecutive payrolls report that widely exceeded economists’ forecasts, eased concerns that economic growth is slowing. Employers added 255,000 jobs last month, surpassing projections for 180,000, while revisions for the prior two months added a further 18,000 jobs. Separate data showed the unemployment rate held steady at 4.9% as the nation’s work force rate crept higher to 62.8%. Also positive, wages increased 0.3%, the most since April.

July’s jobs gains, which are likely to underpin consumer spending into the second half of the year, turned the tide positive for equities last week. The S&P 500 gained over 0.86% on Friday, handing the benchmark index its fifth weekly advance in the past six, finishing the week at a fresh all-time high. Favorable earnings in technology shares helped push the NASDAQ Composite to its first new record close in a year. Equities stumbled on Tuesday, with the S&P 500 suffering its largest one-day decline in a month, as investors worried about the strength of European banks’ balance sheets and erosion in oil.

For the week, the S&P 500 rose 0.49%, the Dow Industrials gained 0.60%, and the NASDAQ Composite gained 1.21%. Sector performance was mixed with five of the ten major sectors posting gains, led by Technology (1.74%), Financials (+1.53%), and Industrials (+0.43%). Utilities (-2.64%) and Telecom (-1.82%) declined the most. The US Dollar Index strengthened last week, gaining 0.695% to end at 96.194. U.S. oil futures inched $0.20 higher last week, but black gold slumped nearly 16% since the July 4th holiday. Treasuries fell, boosting the yield on benchmark 10-year Treasury notes by 13.5 basis points last week to 1.589%.

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Week’s Economic Calendar

Monday, August 8: Fed Labor Market Conditions Index;

Tuesday, August 9: Small Business Optimism Index, Worker Productivity & Costs, Wholesale Trade;

Wednesday, August 10: Mortgage Activity, JOLTS;

Thursday, August 11: Jobless Claims, Import/Export Prices;

Friday, August 12: Retail Sales, Producer Prices, Business Inventories, Consumer Sentiment.

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
Dow Jones 0.60% 0.60% 5.00% 6.42% 5.71%
S&P 500 0.49% 0.49% 7.05% 8.19% 6.27%
NASDAQ 1.21% 1.21% 11.04% 5.07% 2.89%
Russell 3000 0.47% 0.47% 7.47% 8.24% 5.11%
MSCI EAFE -1.35% -1.35% 2.23% -0.94% -8.71%
MSCI Emerging Markets 1.43% 1.43% 10.66% 13.37% 1.75%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond -0.52% -0.52% 1.65% 5.43% 5.71%
Barclays Municipal -0.13% -0.13% 1.87% 4.26% 6.91%
Barclays US Corp High Yield 0.35% 0.35% 5.30% 12.40% 5.50%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity -0.50% -0.50% 1.46% 6.92% -7.46%
S&P GSCI Crude Oil 0.85% 0.85% -5.34% 13.27% -7.06%
S&P GSCI Gold -0.97% -0.97% 5.67% 26.81% 23.79%
Source: Morningstar
Chart of the Week: S&P 500 Foreign Sales Erode to 2006 Low
Reflects Strong Dollar/Widening Trade Deficit
View larger image »

As the above chart from S&P Dow Jones illustrates, the percentage of products and services produced or sold by S&P 500 companies outside the U.S. equated to 44.3% in 2015, down from 47.8% in 2014 and the 46% average from 2009-2013. In 2006, it was 43.6%.

From a geographical standpoint, European sales continued to increase in 2015, with Europe emerging as the dominant region and accounting for 7.79% of all S&P 500 sales, up from 7.46% in 2014 and 6.80% in 2013. After declining four years in a row, U.K. sales increased to 1.86% from 0.89% in 2014. Asian sales decreased, representing 6.77% of S&P 500 sales, down from 7.80% in 2014 and 7.71% in 2013. Canadian sales decreased to 1.17% from 3.51% in 2014 partially because of oil and commodity price declines and less demand for the industry's related services and equipment. African sales also decreased to 3.16% from 4.09% in 2014 and 3.55% in 2013.

Lastly, something for the U.S. presidential candidates to ponder: In 2015, S&P 500 companies continued paying more for income taxes in the U.S. than overseas. Approximately two-thirds of tax payments went to the U.S., up from 61.8% in 2014 and 54.9% in 2013. Meanwhile, 33.2% of taxes were sent to foreign governments in 2015, down from 38.2% in 2014 and 45.1% in 2013. Actual payments to Washington decreased 0.4% in 2015 to $184.4 billion, down from $185.2 billion in 2014.

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The Barclays U.S. Aggregate bond Index is an unmanaged index composed of Barclays Credit government bond index, mortgage backed securities index, and asset backed securities index and is generally representative of the US Bond market.

The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt.

The Barclays U.S. Municipal Bond Index is an unmanaged, market-value-weighted index of investment-grade municipal bonds with maturities of one year or more.

The Bloomberg Commodity Index is a broadly diversified index that allows investors to track commodity futures through a single, simple measure. It is composed of futures contracts on physical commodities and is designed to minimize concentration in any one commodity or sector. It currently includes 19 commodity futures in five groups. No one commodity can comprise less than 2% or more than 15% of the index, and no group can represent more than 33% of the index (as of the annual reweightings of the components).

The CBOE Volatility Index (VIX) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility.

The Citigroup U.S. Economic Surprise Index is a weighted historical standard deviation measure of U.S. economic data surprises of actual data releases versus Bloomberg survey median levels. Calculated daily in a rolling three-month window, when the index is positive the reading suggests that economic releases have on balance [been] beating economists' consensus forecasts. The weights of economic indicators are derived from relative high-frequency spot foreign exchange impacts of 1 standard deviation data surprises. The indices also employ a time decay function to replicate the limited memory of markets.

The CRB Index is a pricing index that measures changes in the price of 22 commodities that are believed to be among the first to react to changes in economic conditions.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.

MSCI Emerging Markets is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.

The NASDAQ 100 Index is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the NASDAQ. No individual listing can have more than a 24% weighting. Launched on February 1, 1985, the index carried a base value of 125.

The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.

The Russell 1000 Index comprises the 1,000 largest companies in the U.S. equity market, and is a subset of the Russell 3000 Index. The Russell 1000 is a market capitalization-weighted index, meaning that the largest companies constitute the largest percentages in the index, affecting performance more than the smallest index members. The inception date for the Russell 1000 and 3000 indices was January 1, 1984.

The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.

The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.

The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold future.

The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI and provides investors with a publicly available benchmark for investment performance in the crude oil market.

The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000. It has since reached a February 1985 high of 164.720, and has been as low as 70.698 in March 2008.

West Texas Intermediate (WTI) is a crude oil stream produced in Texas and southern Oklahoma which serves as a reference or "marker" for pricing a number of other crude streams. WTI is the underlying commodity of the New York Mercantile Exchange's oil futures contracts.

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