The S&P 500 traded 0.69% lower for the week, to close on Friday at 2,126.41, led to the downside by weakness in the Real Estate and Healthcare sectors. Traders used the latest FBI Clinton email probe on Friday as an excuse to crash the market, since they may be heavily betting on Democratic nominee Hillary Clinton to win the presidency and for Democrats to take control of the Senate after the Nov 8 elections.

Earlier in the week, Wall Street was already in a sour mood as Fed officials tried to step up rate hike talks ahead of the Fed blackout period from Oct 25 through Nov 3, 2016. On Monday, Chicago Fed President Charles Evans told reporters after a speech in Chicago that the Federal Reserve is likely to raise short-term interest rates by three quarter-point moves between now and the end of 2017.

According to IHS Markit’s flash survey reported this week, the U.S. manufacturing and services sectors may have shown some signs of improvement in October now that the preliminary Manufacturing Purchasing Managers Index (PMI) came in at 53.2, exceeding analysts expectation of 51.5, while the Services PMI Index rose to 54.8 from the September reading of 52.3.

The hard fact is that American manufacturers still operate in tough environments thanks to a strong U.S. dollar, sluggish demand and tepid spending. The U.S. Department of Commerce said on Thursday that durable goods orders sank to negative 0.1% in September, while core capital goods orders plunged 1.2% month-on-month, or 4.1% year-on-year. Weak core capital goods orders, or core capex, excluding transportation equipment, reflect weak business investment, which also posted the biggest drop in seven months, according to the Commerce Department.

The Bureau of Economic Analysis (BEA), the U.S. Department of Commerce, released the advance estimate of third-quarter GDP 2016 that came in at 2.9%, much higher than the median Wall Street consensus expectation of 2.5%. The advance estimate figure is also far better than the forecast of 2.1% by the Federal Reserve Bank of Atlanta, as well as 2.2% by the Federal Reserve Bank of New York. According to the BEA, the average revision from the advance estimate to the third reading could be as high as 1.1 percentage points, meaning the final reading of third-quarter GDP 2016, when the BEA releases the data on Dec 21, could be as low as 1.8% or as high as 4.0%.

For the week, the U.S. dollar index inched 0.35% lower, to close at 98.342 on Friday. The yield of 10-year U.S. Treasury Notes jumped 6.9% for the week to close at 1.86%, while the yield spread between the 10-year and 2-year U.S. Treasury Notes widened to 1.00 percentage points. China continued selling U.S. Treasuries to prop up the yuan, sending its holdings to the lowest level since November 2012, according to Bloomberg. The 10-year JGB yield jumped 25.4% for the week to negative 0.044 at the close on Friday, while the 10-year German bund yield skyrocketed over 4000%, to close at 0.168%.

The WTI crude price tumbled 4.23% for the week, to close at $48.70 per barrel on Friday, while the Brent crude spot price tanked 2.41% to close at $50.67 per barrel, as OPEC is not getting closer to reaching a consensus about freezing output. According to Reuters, Ministers from Saudi Arabia, Kuwait, Bahrain, Qatar and the United Arab Emirates told their Russian Energy Minister counterpart this week that they are willing to reduce peak oil output by 4%, while Iraq, Libya, Nigeria and Iran have called for an exemption because their output had been hit by wars and sanctions.

The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies dropped by 0.6 million barrels to 468.2 million barrels, excluding the Strategic Petroleum Reserve, in the week ending October 21, compared to S&P Global Platts analysts’ expectations for a rise of 0.4 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory increase of 4.8 million barrels. 

Separately, the EIA said the weekly U.S. crude oil production increased by 40,000 barrels per day (bpd) for the week ending October 21, to 8.504 million bpd. Weekly U.S. crude oil output has fallen about 11.51% 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 declined by 2 to 441, 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 Consumer staples and Utilities, up 0.97% and 0.86%, respectively. The worst performing sectors for the week were Real Estate and Healthcare down 3.40% and 2.78%, respectively.

S&P 500 Summary: +4.03% YTD as of 10/28/16 
Barclay Hedge Fund Index: +4.28% YTD 

Outperforming Sectors: Energy +13.90% YTD, Utilities +11.80% YTD, Information technology +10.97% YTD, Materials +7.09% YTD, Industrials +6.49% YTD, Telecommunication services +5.31% YTD, and Consumer staples +4.19% YTD.

Underperforming Sectors: Financials +1.96% YTD, Consumer discretionary –0.22% YTD, Healthcare –6.02% YTD, and Real Estate –8.58% YTD.

S&P 500 ANALYSIS