Standoffs with North Korea, three devastating hurricanes at home, escalating political tensions and political crises in Spain and Germany did not make a dent in Wall Street’s bull run in the third quarter of 2017. October did not buck this trend. As the month drew to a close, the U.S. markets hit record highs and good economic reports gave investors more to celebrate. Here are the highlights of financial news over the past month.
On Oct. 26, several major technology leaders in the United States announced better-than-expected results for the third quarter of 2017. As a result, the technology-heavy Nasdaq Composite and Nasdaq 100 indices rose 2.1 percent and 2.8 percent, respectively, to reach record highs that day before biotech shares tanked, dragging the healthcare sector lower and the Nasdaq in its wake. Amazon posted a dazzling 34 percent increase in revenues in the past quarter – its recent acquisition of Whole Foods helped to push earnings higher than earlier forecasts. Its net earnings of $256 million, or 52 cents per share, handily surpassed previous share earnings estimates. The good news from some of Nasdaq’s best-known companies –Microsoft, Alphabet (Google’s parent company) and Intel – also was credited with sparking a rally in the Asian equity markets.
The Dow Jones Industrial Average also was boosted by good third-quarter earnings. Nike commanded the spotlight as the blue-chip index’s biggest gainer with share prices increasing 3.4 percent after the company raised its revenue growth targets for the coming years.
All in all, analysts were happy with the third quarter Gross Domestic Product results, which showed a 3 percent annualized growth rate, up from the estimate of 2.5 percent. Forecasters noted that natural disasters like Hurricane Harvey and Hurricane Irma did not have such a negative impact on the national economy as they had feared. Businesses boosted their inventory holdings. This suggests they are expecting solid demand in the coming months. Business investment – spurred by spending on new equipment – rose during the third quarter of 2017 at a rate of 3.9 percent. On the trade front, exports rose by 2.3 percent and imports declined by 0.8 percent – a further contribution to positive growth.
Speculation abounds regarding the Federal Reserve – most especially as to how the nation’s central bank will respond to the recent solid economic data and to the equity markets’ continued upswing. Many traders expect a rate increase before the year’s end. The Fed’s easing policy over recent years has helped keep the nation’s recovery moving forward. Now that we are out of the woods, fund managers and investment strategists are hoping the Fed proves as adept at steering a successful course whilst tightening monetary policy.
Change always brings a certain amount of trepidation, and there’s a lot of change on the horizon for the Fed. With Vice Chairman Stanley Fischer’s recent resignation, the Fed will lose its most prominent policy hawk, as well as a strong advocate for tough oversight of banks. Janet Yellen’s term as Fed Chairwoman concludes in February 2018. This means that the top two positions at the Fed will both become vacant within five months of each other. Among the four or five contenders for the top slot, Fed Gov. Jerome Powell is rumored to be a frontrunner, though many believe the president has not yet made up his mind. This appointment is a very important one with major ramifications for both the markets and the nation’s economy.
The above is intended as general commentary and is not intended to be a substitute for counsel from professional tax and investment advisors.