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The S&P 500 surged 3.80% for the week, to close on Friday at 2,164.45, led to the upside by Financials and Industrials, after Donald Trump’s surprising victory on November 9. Investors might have overreacted to the U.S. Presidential election results early Wednesday morning in New York, as the E-Mini S&P 500 futures plunged 4.54% to an intra-day low of 2,028.50 before bouncing back to close at 2,160.25.
For the week, the U.S. dollar index (DXY) gained 2.02%, to close at 99.05 on Friday, despite that it plunged 2% during overnight trading early Wednesday morning to a low of 95.905 before bouncing back. It was the Wall Street consensus that a Trump win would ignite panic selling of the dollar, and the buying of safe-haven currencies, according to Bloomberg. Wall Street may have changed their opinions about Trump’s presidency and are betting that the Federal Reserve will raise the federal funds rate target to 50 and 75 basis points at the December FOMC meeting, regardless of the uncertainties.
The probability of a 25 basis point rate hike at the December 13-14 FOMC meeting has now surged back to 81.0%, based on the CME Group 30-day Fed Fund futures prices as of November 12. The same probability level registered on November 8, before the election.
The yield of 10-year U.S. Treasury Notes skyrocketed 20.11% for the week to close at 2.15%, while the yield spread between the 10-year and 2-year U.S. Treasury Notes narrowed to 1.23 percentage points. The 10-year JGB yield jumped 47% for the week to negative 0.032 at the close on Friday, while the 10-year German bund yield surged 129%, to close at 0.309%.
The WTI crude price lost another 1.50% this week, to close at $43.41 per barrel on Friday, while the Brent crude spot price tanked 2.33% to close at $44.51 per barrel, after the EIA report showed U.S. weekly oil inventory continues to build, while the U.S. oil production ramped up sharply. Crude prices plunged almost 3% on Friday after Reuters reported that The Organization of the Petroleum Exporting Countries (OPEC) increased its output to 33.64 million barrels per day (bpd) in October, up 240,000 bpd from previous month.
The WTI crude oil futures (CLZ6) tanked 4.25% to a session low of $43.07 per barrel in electronic trading early Wednesday morning in New York, after the election results pointed to a Trump victory. In fact, Trump’s America First Energy Plan could be bearish for crude prices since it calls for American energy dominance, total independence from OPEC, revenues from energy production to rebuild roads, schools, bridges and public infrastructure, and cheaper energy for American agriculture, which could boil down to one thing — increased U.S. crude oil production.
The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies increased by 2.4 million barrels to 485.0 million barrels, excluding the Strategic Petroleum Reserve, in the week ending November 4, compared to S&P Global Platts analysts’ expectations for a rise of 1.6 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory increase of 4.4 million barrels.
Separately, the EIA said the weekly U.S. crude oil production jumped by 170,000 bpd for the week ending November 4, to 8.692 million bpd. Weekly U.S. crude oil output has fallen about 9.55% from the peak level of 9.61 million bpd during the week ending June 5, 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count rose by 2 to 452, compared to 316, when the rig count hit the low on June 6, 2016.
The best performing S&P 500 sectors for the week were Financials and Industrials up 11.33% and 7.96%, respectively. The worst performing sectors for the week were Utilities and Consumer staples down 4.08% and 2.12%, respectively.
S&P 500 Summary: +5.90% YTD as of 11/11/16
Barclay Hedge Fund Index: +4.08% YTD
Outperforming Sectors: Energy +14.00% YTD, Industrials +13.63% YTD, Financials +11.70% YTD, Materials +10.21% YTD, Information technology +9.32% YTD, and Utilities +6.03% YTD.
Underperforming Sectors: Telecommunication services +2.80% YTD, Consumer discretionary +1.96% YTD, Consumer staples –0.12% YTD, Healthcare –2.32% YTD, and Real Estate –11.56%
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