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Perspectives from Above the Noise -- Week of January 9th, 2017

| January 09, 2017
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The S&P 500 extended gains on Friday, closing at a fresh all-time high after investors welcomed a December payrolls report that featured a 2.9% year-over-year gain in wages, the strongest 12-month increase since 2013. Meanwhile, the Dow Jones Industrial Average garnered intense intra-day press coverage, coming within 0.37 of a point of reaching the 20,000 milestone before fading in afternoon trading. The U.S. economy created 156,000 new jobs last month, shy of projections for 175,000, while the unemployment rate inched higher to 4.7% from 4.6%.

For the week, the Dow Industrials rose +1.02% during the New Year’s holiday-shortened week, its strongest performance in four-weeks. The S&P 500 advanced +1.76% and the MSCI EAFE (developed international) had a +1.78% gain.

What We’re Reading

Dow Industrials Makes Milestone Approach -- CNBC

Former IMF Economists: No Dollar Strength Fears -- Marketwatch

Oil Falls on U.S. Drilling Growth -- Bloomberg

Chart of the Week:U.S. ISM Manufacturing PMI at Multi-Year High

Both the ISM and Markit Economics’ manufacturing Purchasing Managers Indexes (PMI) for the U.S. continue to post steady improvement that began early in 2016.  Importantly, the 2016 gains have been driven by strength in the indices respective New Orders components. As Chart 1 illustrates, the ISM U.S. manufacturing PMI jumped 1.5 points in December to 54.7, its highest reading in two years (red line).  The New Orders component (black line) surged 7.2 points to 60.2, the highest since Oct. 2014.  Although not displayed, the ISM’s Prices Paid component jumped 11 points to a 5.5-year high.  Markit Economics’ U.S. Manufacturing PMI for December rose 0.2 points to 54.3, a 21-month high.  Its New Orders remain close to a 2-year high.

Argus Research Chief Strategist Peter Canelo notes that the manufacturing recovery in the U.S. also has been seen in our global trading partners. The PMI lows in developed markets were seen in the first or second quarters of last year and, in some cases, their rise has been stronger than in the U.S. (based on Markit PMIs).  For example, despite Brexit concerns, Markit’s U.K. Manufacturing PMI has surged 7.9 points since mid-year 2016 to 56.1, and the 2.5 point jump in December puts the U.K. index well above the U.S. Markit Manufacturing PMI, currently at 54.3.  Canello also observes that the recoveries in global manufacturing are largely credited to significant declines in currency values versus the U.S. dollar.   

Some materials are chosen by the Cetera Investment Management team and summarized by Jason Vitucci who is not affiliated or registered with Cetera. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. Cetera Investment Management individuals who provide investment management services are not associated persons with any broker-dealer. International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.

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