Market Recap – February 10, 2017

Stocks Rally in First Full Week of February

  • Indices close at record highs
  • Trump administration says corporate tax reform plan coming in 2-3 weeks
  • Key Fed Governor resigns unexpectedly

A strong Thursday and Friday pushed stocks higher on the week. The Dow increased 1.0% while the S&P 500 added 0.8%. The Dow, S&P 500 and NASDAQ all finished the week at record highs.

A lot of the strength the last two days was driven by an upcoming announcement on corporate taxes. In a meeting with airlines executives yesterday, Trump said that a ‘phenomenal’ announcement was coming in the next 2-3 weeks on corporate tax reform. There’s really been no info on what this potential proposal will include. House Republicans continue to discuss the Border Adjustability Tax, but it’s unclear if the administration will go in this direction. Stocks rallying on potential news has been a common theme in the last few months. We still haven’t seen many, if any, concrete proposals on financial regulation, corporate regulation, corporate taxes, etc and yet stocks are pricing in a lot of good news. Maybe the reality will live up to expectations. There’s an old saying on Wall Street, ‘buy the rumor, sell the news’ and that might be shaping up as true as we sit at all-time highs. I don’t make investment decisions based on potential short-term movements, instead preferring to buy quality companies that are attractive longer-term holdings, but we could see some market volatility as actual proposals come out and differ from the optimism people are currently projecting. Read More

Daniel Tarullo, a Fed Governor, unexpectedly announced his resignation effective April 15th. Mr. Tarullo was appointed by President Obama in 2009 and his term was scheduled to run until 2022. He didn’t give a reason for his departure, but it does leave three vacancies for President Trump to fill on the important seven-member committee. Fed Chairman Janet Yellen’s current term ends next February and it’s unclear whether or not she is interested in returning or whether Trump will ask her to return. The Fed Governors play an important role in financial regulation and this opening gives the Trump administration the potential to make significant changes. Read More

Oil was essentially flat this week, closing down one penny to $53.82/barrel. The yield on the 10-yr Treasury declined, closing at 2.41%, from 2.48% a week ago. The average rate on a 30-yr mortgage ticked slightly lower to 4.17% from 4.19% last week.

Close Weekly YTD
Dow Jones 20,269.37 1.9% 2.6%
S&P 500 2,316.10 0.8% 3.5%
Oil 53.82 (0.0%) (0.1%)
10-yr Treasury (∆ in bps) 2.41 (7) (4)

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