Stocks continued their advance on generally strong earnings reports this week despite the GDP report showing a slow first quarter economy. The S&P 500 rose 1.51%, the Dow gained 1.91%, and the NASDAQ added 2.32%.[1] On Tuesday, the NASDAQ posted record highs as it closed over 6,000 for the first time.[2] Internationally, the MSCI EAFE was up 2.97%.[3]
On Friday, April 28, we learned that first quarter GDP increased a modest 0.7%, lower than the reported consensus expectations of approximately 1%.[4] Oil drilling and housing performed well, but consumer spending fell, largely due to poor auto sales and lower utility bills.[5] Consumer spending, the largest segment of our economy, rose by only 0.3%.[6]
While this growth is slower than the 2.1% last quarter—and the lowest we’ve experienced in three years—the picture is likely not as negative as it may seem at first.[7] Not only did mild weather affect consumer spending on heating, but the government has also acknowledged its challenges accurately calculating data for first quarter GDP.[8]
In addition to these GDP readings, a number of other events and data releases contributed to market performance this week.
Domestic Developments
- Corporate Earnings Were Largely Positive
Thus far in the first quarter, 79% of reporting companies published strong profits.[9] In particular, consumer discretionary companies and commodity producers reported robust earnings while phone services and real estate investment trusts had weaker results.[10]
Strong Reports:[11]
Amazon
General Motors
Alphabet (parent company of Google)
EXXON
Chevron
Disappointing Reports:[12]
Procter & Gamble
U.S. Steel
- Trump Announced Tax Plan
President Trump outlined his new tax proposal, including plans to cut corporate taxes to 15%.[13] Individual tax rates would fall to 10%, 25%, and 35% if Congress adopts the President’s plan.[14]
International News
- North American Trade Experienced Tension
On Wednesday, April 26, reports that the U.S. may pull out of NAFTA created concern in financial markets.[15] By Thursday, however, markets calmed after President Trump said he would agree to requests from Canada and Mexico’s leaders to renegotiate the decades-long trade deal.[16] As these negotiations continue, two controversies lay in the background:
- S. dairy farmers’ claims that Canadian action concerning milk imports violates the trade agreement.[17]
- A new tariff of up to 24% on Canadian softwood lumber that President Trump announced last week.[18]
Finding the right solution for the negotiations is important to the U.S., Canada, and Mexico. NAFTA affects a significant portion of each country’s economy, including industries such as farming, automotive, and energy. Trade with the two countries accounted for approximately $584 billion in U.S. exports in 2016.[19]
- French Elections Moved Markets
Political newcomer Emmanuel Macron emerged as the frontrunner in the French election while ultra-right nationalist Marine Le Pen’s chances of winning the May 7 final election appear to be fading.[20] After the first round election results eased investor concerns about a possible Le Pen victory, the markets reacted positively with $2.4 billion flowing into European equities by April 26.[21] Asian equities also rallied.[22]
What’s Next
With Congress avoiding a shutdown last week, the markets should focus this week on:
- Earnings reports
- Construction spending
- April auto sales
- Manufacturing data
- Federal Reserve meeting on Wednesday
By Friday, most remaining S&P 500 companies’ earnings reports will be in, including Apple, Facebook, and Pfizer.[23] Looking ahead, we will watch for what economic stories emerge from the data we receive, including the upcoming jobs report. For now, despite the first quarter’s initially slow GDP growth of 0.7%, expectations continue for 2.5% growth in 2017.[24]
ECONOMIC CALENDAR:
Monday: Construction Spending, Personal Income and Outlays, PMI Manufacturing Index, ISM Manufacturing Index
Wednesday: ADP Employment Report, PMI Service Index, ISM Non-Manufacturing Index
Thursday: International Trade, Productivity and Costs
Friday: Employment Situation
| DATA AS OF 4/28/2017 | 1 WEEK | SINCE 1/1/17 | 1 YEAR | 5 YEAR | 10 YEAR |
| STANDARD & POOR’S 500 | 1.51% | 6.49% | 15.44% | 11.27% | 4.87% |
| DOW | 1.91% | 5.96% | 17.82% | 9.65% | 4.83% |
| NASDAQ | 2.32% | 12.34% | 26.64% | 14.70% | 9.13% |
| INTERNATIONAL | 2.97% | 8.89% | 8.30% | 3.88% | -1.96 % |
| DATA AS OF 4/28/2017 | 1 MONTH | 6 MONTHS | 1 YEAR | 5 YEAR | 10 YEAR |
| TREASURY YIELDS (CMT) | 0.68% | 0.99% | 1.07% | 1.81% | 2.29% |
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5- year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Amending Errors on Filed Returns*
Filing your taxes can be a complicated, cumbersome process. As a result, errors sometimes slip through and make it into the tax returns you file. If you noticed errors after you’ve filed with the IRS, you are able to make amendments. Here are some key tips to help you take the right steps.
Can you file amended returns electronically?
No. You must file an amended return by mailing the IRS a paper copy of form 1040X.
What changes does the IRS allow you to make?
Taxpayers can amend their return for specific reasons:
- Allowed: You can make changes to your return when you have edits such as updating your income amounts, correcting your filing status, and claiming deductions.
- Not Allowed:
Math errors: You typically do not need to file an amended return to change any math errors. The IRS calculates all math and automatically corrects wrong calculations that your return includes.
Missing forms: You don’t need to file a new return if you forgot to include a form, such as your W-2. The IRS will send you a letter to request missing documents.
You usually have three years to file an amended return from the date that you originally filed. Other details apply, so be sure to check out further guidance on the IRS website.
*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Tip courtesy of IRS.gov[25]
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Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
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Consult your financial professional before making any investment decision.
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[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO®ion=usa&culture=en-US
[2] https://www.usatoday.com/story/money/markets/2017/04/25/earnings-power-dow/100875436/
[3] https://www.msci.com/end-of-day-data-search
[4] https://www.bloomberg.com/news/articles/2017-04-28/u-s-economy-expands-at-slowest-pace-in-three-years
[5] https://www.bloomberg.com/news/articles/2017-04-28/u-s-economy-expands-at-slowest-pace-in-three-years
[6] https://www.bloomberg.com/news/articles/2017-04-28/u-s-economy-expands-at-slowest-pace-in-three-years
[7] http://www.cnbc.com/2017/04/28/first-estimate-of-2017-q1-gdp.html
[8] http://www.cnbc.com/2017/04/28/first-estimate-of-2017-q1-gdp.html
[9] https://www.bloomberg.com/news/articles/2017-04-28/anything-but-soft-earnings-data-starting-to-smack-of-rally-years
[10] https://www.bloomberg.com/news/articles/2017-04-28/anything-but-soft-earnings-data-starting-to-smack-of-rally-years
[11] http://www.cnbc.com/2017/04/28/us-markets.html
https://www.bloomberg.com/news/articles/2017-04-28/exxon-profit-beats-expectations-with-boost-from-overseas-oil
[12] https://finance.yahoo.com/news/us-steel-plunges-25-sector-134152752.html
http://www.cnbc.com/2017/04/26/proctor-gamble-reports-third-quarter-earnings.html
[13] https://www.bloomberg.com/news/articles/2017-04-26/white-house-unveils-trump-s-opening-bid-for-biggest-tax-cut
[14] https://www.whitehouse.gov/blog/2017/04/26/president-trump-proposed-massive-tax-cut-heres-what-you-need-know
[15] http://www.cnbc.com/2017/04/27/reuters-america-update-5-trump-says-was-psyched-to-terminate-nafta-but-reconsidered.html
[16] http://www.cnbc.com/2017/04/27/reuters-america-update-5-trump-says-was-psyched-to-terminate-nafta-but-reconsidered.html
[17] https://www.bloomberg.com/politics/articles/2017-04-24/trump-said-to-plan-20-tariff-on-canadian-softwood-lumber-j1wq4tyg
[18] https://www.bloomberg.com/politics/articles/2017-04-24/trump-said-to-plan-20-tariff-on-canadian-softwood-lumber-j1wq4tyg
[19] http://www.cnbc.com/2017/04/27/reuters-america-update-5-trump-says-was-psyched-to-terminate-nafta-but-reconsidered.html
http://money.cnn.com/2017/04/27/investing/nafta-us-mexico-canada-what-is-at-stake/
[20] http://www.cnn.com/2017/04/23/europe/french-presidential-election-results/
[21] https://www.bloomberg.com/news/articles/2017-04-28/investors-are-pouring-money-into-european-stocks-like-it-s-2015
[22] http://www.cnbc.com/2017/04/24/asia-markets-global-markets-rally-on-french-polls-investors-eye-north-korea.html
[23] http://www.cnbc.com/2017/04/28/earnings-could-provide-the-fuel-for-stock-gains-but-jobs-economic-data-need-to-perk-up.html
[24] https://www.edwardjones.com/market-news-guidance/recent-news/weekly-recap.html
[25] https://www.irs.gov/uac/helpful-tips-to-keep-in-mind-when-amending-your-tax-return
