September’s momentum carried into October. The first week of the new month marked the 4th consecutive week of gains for the S&P 500. Thursday set the longest record in 20 years with six consecutive closing highs for the S&P 500. Stocks pull back Friday after the first negative jobs report in seven years but some of the early losses were erased as buyers took control for the second half of the day to inch the index to just under flat.
Employment in September’s jobs report was expected to be less than the usual 2017 quota of around 180,000 due to the setbacks caused by Hurricanes Harvey and Irma. However, I did not see anyone expecting to see a negative count. This report ended the longest stretch of job growth in history.
So why did we not see a correction in stocks? The answer is the effect of the hurricanes is temporary. When the surveys for the jobs report were taken, business was temporarily disrupted in the affected areas. Most jobs were not lost but put on hold. This is reflected in the unemployment rate dropping more than expected to 4.2 percent from 4.4 percent and wage gains up to 2.9 percent.
Another head scratcher was why stocks opened strong Monday despite the tragic mass shooting in Las Vegas on Sunday. This bull market has become emotionless, at least for the time being. Investors are focused on riding the trend and for the most part the U.S. economy is looking good and tax cuts are on the way for businesses. It seems to me the market is wringing out the growth it can while interest rates are still low. The next rate hike from the Fed is expected this December. Will this trend continue until then?
The C and S-fund were up for the week with more than 1 percent in gains. The S-fund led for the week with a gain of 1.37 percent. The I-fund fell short of flat for the week with a loss of 0.05 percent due to a boost in the dollar this week. The F-fund lagged with a loss of 0.15 percent.
Here are the weekly, monthly, and annual TSP fund returns for the week ending October 6th:
The SPY (S&P 500) surpassed the rising resistance of the highs of the last four months. The index still has some resistance to overcome though as seen in the chart below. An open gap still sits below but the index keeps moving further from its sitting price. The C-fund was up 1.25 percent for the week.
The Dow Completion Index looks like the SPY chart above but it is now sitting on the trend line of the June and July highs. It too has an open gap below as well. The S-fund led the TSP funds for the week with a gain of 1.37 percent.
EFA (EAFE Index) retreated off the highs of September as the dollar had a boost this week. The index had more of a pause then a pull back. I made the chart look further back than usual to remind us of the quite significant open gap from April. The I-fund was down 0.05 percent for the week.
AGG (Bonds) seemed as if it was about to fill the open gap above from late September. However the jobs report affected bonds and instead AGG broke down from the bear flag that we’ve discussed in the Market Comments this week. This put AGG back below its 50-day EMA.
Looking back for the whole year, this is the second time AGG has dipped below its 50-day EMA since it crossed over in March for an extended stay. Since March, the 50-day has held twice as support. The F-fund lagged the TSP funds for the week with a loss of 0.15 percent.
Good luck and thanks for reading. We will be back here next week with another TSP Wrap Up. You can read our daily market commentary at the Market Comments page. If you need more help deciding what to do with your account, perhaps one of our Premium Services can help.
Thomas A Crowley
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