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Compass Financial Advisors

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 Stocks fell for the week as investors grappled with higher bond yields, political risks around the globe, trade tensions and higher energy prices. The real estate and utilities sectors, which tend to be bond proxies due to their high dividend yields, lost over 2% for the week. By contrast, the materials and energy sectors posted the biggest gains as investors are starting to price in higher inflation expectations. In economic news, retail sales rose 0.3% in April, in-line with forecasts, as higher paychecks from tax-cuts offset rising fuel costs. In stock news, both Walmart Inc.

 Treasury prices dropped moderately over the course of the week on strong economic data and speculation that both the Federal Reserve and European Central Bank may raise interest rates more quickly than previously expected. On Tuesday, April Advance Retail Sales were solid while March sales figures were revised to 0.8%, and May Empire Manufacturing was higher than expected, causing a risk-on environment which led to a significant drop in Treasury prices. It was also reported on Tuesday that the U.S.

 View from the Observation Deck  

Bob Carey, Chief Market Strategist at First Trust Advisors L.P., discusses the latest developments in the market and takes a look ahead. 

 The S&P 500 posted its first weekly gain in the past three weeks with a 2.49% return and the best weekly gain over the past two months. Investors are more confident that inflation will remain at bay after trade tensions have eased with the rest of the world. The US dollar exhibited a calmer week as it was little changed, while the 10-year treasury steadied under 3%. Volatility is still present in other markets, with oil bouncing off highs not reached since the end of 2014. In turn, energy stocks traded higher to post the best weekly gain in the S&P 500.

 Last week began with Treasury yields climbing higher as oil prices rallied above $70 a barrel for the first time since 2014. After President Trump withdrew the U.S. from the Iran nuclear deal, the prospect of new sanctions on oil exports led to concerns that the potentially reduced supply could intensify inflationary pressures and cause the Fed to hike rates more aggressively. On Wednesday, April PPI data came in below consensus, however the benchmark Treasury 10-yr note still closed above 3%.

 View from the Observation Deck  

 View from the Observation Deck

 Equities took a strong leg up last Friday, but it wasn't enough to make up for the declines earlier in the week as the S&P 500 Index returned -0.21%. The index closed the month of April with a gain of 38 basis points after large losses in both March and February. The Federal Open Market Committee met on Tuesday & Wednesday and acknowledged the strengthening labor market, increased economic activity, and strong job gains. The committee left rates unchanged as many investors expected.

 U.S. Treasuries exhibited weakness last week, especially short dated maturities, amid strong economic data, rising energy prices, larger debt auctions and a Federal Reserve meeting which saw rates left alone. While Wednesday's Federal Reserve meeting saw rates left unchanged, the future implied probabilities are pricing in a nearly 75% chance for an increase in June. Including the June raise, implied probabilities suggest a total of two more raises in 2018 but are still allowing a 37% chance for three raises. Oil closed near $70/barrel as Venezuela production is in freefall.

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Securities offered through Harbour Investments, Inc.,
member FINRA/SIPC. http://www.finra.org/
http://www.sipc.org/about-sipc

Investment Advisory Services offered through
Compass Financial Advisors, LLC,
a registered Advisor. 
Compass Financial Advisors, LLC &
Harbour Investments, Inc.
are separate entities.

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