S&P 500

S&P 500 Crashes, But Recoups Almost All Of Its Losses For The Week, After American Media Spooks The Market With Rumors About Trump

Ed Wijaranakula, Ph.D.
Fri May 19, 2017

The S&P 500 was down another 0.38% for the week, to close on Friday at 2,381.73, as the American media continued to spook the market with rumors about President Trump. The S&P 500 crashed 1.82% on Wednesday after several news outlets reported that unnamed sources said there were memos from former FBI Director James Comey, who was fired just last week, about his conversations with Trump. 

Here's how Kurtis Lee at Los Angeles Times put it on Wednesday, “As President Trump exited Air Force One in Groton, Conn., on Wednesday ahead of a commencement speech at the U.S. Coast Guard Academy, the chyron (video graphic on the television screen) on CNN read: 'Sources – Comey says Trump tried to end Flynn probe.' On MSNBC: 'Memo claims Trump urged Comey to drop Flynn probe.'”. 

In an interview with Good Morning America on Thursday, Rep. Jason Chaffetz, the Republican chairman of the House Oversight and Government Reform Committee, expressed skepticism about whether Comey's memos, attributed by several news outlets on Wednesday, are “actually there”.

The best performing S&P 500 sector for the week was Real Estate ($SPRS), up 1.23%, while the worst performing sectors for the week were Financials ($SPF) and Consumer discretionary ($SPCC), down 1.00% and 0.78%, respectively. The S&P 500 Energy sector ($SPEN) was up just 0.16% this week, despite that the WTI crude spot price surged almost 6% for the week.

The U.S. dollar index, or DXY, was down 2.12% for the week, closing at 97.03 on Friday, while the Japanese yen depreciated 1.84% against the U.S. dollar at 111.26.70 yen. The spot gold price is back above the 200-day SMA, up 2.11% for the week, at $1,253.60 per ounce on Friday.

The yield of 10-year U.S. Treasury Notes was down 4.29% for the week, to close on Friday at 2.23%, while the yield of the 2-year Notes lost 0.78% to close at 1.28%. The yield spread between the 10-year and 2-year U.S. Treasury Notes tumbled 8.65% at 0.95 percentage points. Surprisingly, the current probability of a quarter percentage point hike by the U.S. Federal Reserve, to the target Fed funds rate of 100 to 120 basis points, is 78.5% as of May 19, up 9.3 percentage points from last Friday, based on CME Group 30-Day Fed Fund futures prices.

The WTI crude spot price surged 5.92% for the week, closing at $50.67 per barrel on Friday, while the Brent crude spot price jumped 5.45% to close at $53.61 per barrel, after Saudi Arabia and Russia's surprise announcement on Monday that they agreed to extend their output cuts until March 2018, ahead of the OPEC meeting on May 25 in Vienna. 

The EIA weekly report for U.S. oil inventory showed that domestic crude supplies declined by 1.75 million barrels to 520.77 million barrels, excluding the Strategic Petroleum Reserve, in the week ending May 12, compared to the S&P Global Platts forecast for a stockpile decline of 2.2 million barrels. The American Petroleum Institute, or API, inventory data on Tuesday showed a U.S. crude inventory build of 882,000 barrels.

The net imports for crude oil in the week ending May 12, was 7.5 million barrels per day, or bpd, up 577,000 bpd compared to the previous week, as both crude imports and exports surged 970,000 bpd and 393,000 bpd, respectively. The EIA monthly reports for U.S. crude oil imports and exports, released at the end of April, showed that the U.S. crude oil imports in February declined 0.3% year-on-year to 7.89 million bpd, while exports skyrocketed 198.3% to 1.12 million bpd. Based upon our estimation, U.S. crude oil exports could reach 1.42 million bpd in May, making the OPEC production cuts to ease the glut near term less likely. The EIA monthly reports for March 2017 is due on May 31.

Separately, the EIA said the weekly U.S. crude oil production decreased 9,000 bpd, for the week ending May 12, to 9.31 million bpd. U.S. crude oil output increased 48,000 bpd to an average of 9.31 million bpd in May, compared to an April average of 9.26 million bpd. Output has fallen just 3.03% from the peak level of 9.60 million bpd in June 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count rose another 8 to 720, compared to 316, when the rig count hit the low on June 6, 2016.

S&P 500 Summary: +6.38% YTD as of 05/19/17 
Barclay Hedge Fund Index: +3.70% YTD 

Outperforming Sectors: Information technology +16.95 YTD, Consumer discretionary +9.53% YTD, Healthcare +8.65% YTD, Consumer staples +6.74% YTD, and Utilities +6.56% YTD.

Underperforming Sectors: Materials +5.21% YTD, Industrials +5.23% YTD, Real Estate +2.92% YTD, Financials +0.00% YTD, Energy –10.16% YTD, and Telecommunication services –11.44% YTD.


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