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Perspectives from Above the Noise -- Week of November 6th, 2017

Perspectives from Above the Noise -- Week of November 6th, 2017

November 06, 2017

U.S. stocks climbed higher Friday, sending the S&P 500 to its eighth weekly advance, its longest string of weekly gains since 2013. Investor sentiment was boosted following better-than-expected earnings and strong services sector activity data, both of which added optimism on economic growth. The October payrolls report offered a mixed picture of the strength of the labor market. Non-farm payrolls increased 261,000 last month, the most in a year, while revisions for the prior two months added another 90,000. Despite the rebound from September’s hurricane-related jobs slowdown, the gain was shy of economists’ projections for a 313,000 increase. Also disconcerting, wage gains were unchanged, which reduced the year-over-year change in workers’ earnings to 2.4% from 2.9%. On a brighter note, the unemployment rate fell to 4.1% from 4.2% and the underemployment rate fell to 7.9% from 8.3%.

For the week, the S&P 500 rose +0.29%, the Dow Industrials gained +0.45% to finish at a new record high, and the MSCI EAFE (developed international) advanced +0.92%.

What We’re Reading

Crucial Time for Tax Reform -- Bloomberg

Corruption Crackdown in Saudi Arabia -- Reuters

Chart of the Week:  U.S. Manufacturing Continues to Expand

The ISM Manufacturing Index is based on purchasing manager survey responses from over 400 U.S. firms across 20 industries, as compiled by the Institute of Supply Management. Equal weight is given to responses in five areas: new orders, production, supplier deliveries, employment and inventories. Generally, a PMI reading over 50 indicates economic expansion, and a reading in the low 40's suggests recessionary conditions. Changes in the index is also helpful in gauging the direction of economic growth.

As Chart 1 illustrates, October's PMI index stood at 58.7, in line with August but slightly below expectations and lower than the month prior. The month-to-month changes were caused by shifting delivery times, which shortened as a reaction to hurricanes, and normalized in October. In our view, this reading is still a strong indication for continuing growth, as the index is in the 94th percentile. In fact, over the last 20 years, the PMI reading has been higher only 6% of the time.

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.