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Bob Carey
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  Stocks Ended Aug. 26, 2016
Posted Under: Weekly Market Commentary

 
Equity markets traded down slightly last week, the S&P 500 Index lost 0.67% as the odds of a Fed interest rate raise grew. As of a week ago, Bloomberg calculated the odds of a Fed interest rate hike by December of 51.1%, those odds closed at 62.9% Friday. Fed Chair Janet Yellen started Friday off with a bullish economic assessment, which was quickly followed by Vice Chair Staley Fisher mentioning a possible September hike which sent the equity markets down slightly. All told, while higher rates mean more expensive borrowing, having the Fed Chair confirm a strengthening economy is a long term positive for equities. Odds of higher interest rates traditionally sends the Financial sector higher, banking names in particular and this week was no exception. The S&P 500 Financial Index was up 0.37% while the S&P 500 Banking Index was up over 1%. This year there have been two pronounced themes in equity markets that continued this week. The first has been smaller caps outperforming larger caps, the second value names outperforming growth names. This week the larger cap S&P 500 Index had a -0.7% return while the mid and small cap S&P 1000 had a 0.0% return.  Year-to-date the S&P 500 Index is up 7.7% compared to an S&P 1000 Index return of 12.8%. Further, the S&P 500 Growth Index had a return of -0.7% this week, while the S&P 500 Value Index had a -0.6% return. Year-to-date the S&P 500 Growth Index has a return of 6.1% while the S&P 500 Value Index has a return of 9.3%. If these macro trends hold for 2016 it will be the first time that small and mid best large since 2012, and the first time value beats growth since 2013.  Turning to company specific news, Best Buy Co Inc. saw its shares soar over 20% on news that they beat revenue and earnings guidance because of strong same store sales comps and a surge in enterprise spending. Not all news was good as Dollar General Corp. fell nearly 17% as earnings and revenue missed expectations and worry on what effect higher wages will have on profitability. Looking ahead to next week, there are several potential market moving economic data points that are expected to be released. They include: Annualized GDP, University of Michigan Consumer Confidence, Dallas Fed Manufacturing, Chicago Purchasing Manager and Unemployment numbers.
Posted on Monday, August 29, 2016 @ 8:47 AM • Post Link Share: 
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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