Benchmarks closed in the red on the final trading session of 2017 following a broad-based sell-off. Additionally, reports of Russian tankers supplying fuel to North Korea over the last few months raised geopolitical concerns, which in turn weighed on markets. Additionally, all three key U.S. indexes also posted weekly losses but reported monthly, quarterly and yearly gains.
Encouraging economic data, passage of the Tax Cuts and Jobs Act, lower interest rates and strong earnings boosted markets during 2017. All the three indexes registered their best yearly increase in 2017 since 2013. Markets were closed on Monday owing to the New Year Holiday.
How the Benchmarks Fared?
During the last session of 2017, the Dow Jones Industrial Average (DJI) decreased 0.5%, or 118.29 points to close at 24,719.22. The S&P 500 fell 0.5% to close at 2,673.61. The tech-laden Nasdaq Composite Index closed at 6,903.39, losing 0.7%. The fear-gauge CBOE Volatility Index (VIX) traded near 10 on Friday, considerably lower than its long-term average of 20.
A total of around 4.94 billion shares were traded on Friday, lower than the last 20-session average of 6.4 billion shares. Decliners outnumbered advancers on the NYSE by a 1.46-to-1 ratio. On Nasdaq, a 1.91-to-1 ratio favored declining issues. For the week, the Dow, S&P 500 and Nasdaq declined 0.1%, 0.4% and 0.8%, respectively.
What Dragged the Benchmarks?
Markets witnessed a sell-off on Friday, which in turn weighed on majority of the S&P 500 sectors. Additionally, a report highlighted that North Korea was had received fuel supplies from Russia on several occasions in the last few months, per two senior Western European security sources. This in turn raised concerns of possible geopolitical tensions in coming days, which in turn contributed to Friday's late sell-off.
Majority of the S&P 500 sectors declined with the Financial Select Sector SPDR (XLF) falling 0.7%, becoming the biggest loser among the S&P 500 sectors. Some of its key holdings including Bank of America Corporation BAC and Wells Fargo & Company WFC fell 0.9% and 1%, respectively. Bank of America possess a Zacks Rank #2 (Buy), while Wells Fargo has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
For the month, the Dow increased 1.8%, registering nine straight months of gains for the first time since 1959. The S&P 500 rose 1% in December, posting nine consecutive months of increases for the first time since 1983. Additionally, the Nasdaq advanced 0.4%, marking a monthly rise in 11 out of 12 months in 2017, its first such feat. Major developments that contributed to December's gains were the passage of the Republican tax cut Bill, now known as the Tax Cuts and Jobs Act, and the third Fed rate hike of this year. For the quarter, the Dow, S&P 500 and Nasdaq gained 7.9%, 3.3% and 1.3%, respectively.
For the year, the Dow, S&P 500 and Nasdaq climbed 25.2%, 19.5% and 28.2%, respectively, posting their best yearly increase since 2013. The Dow notched its 71st record close in 2017, for the first time in a year. Also, the tech-heavy Nasdaq posted yearly gains for six straight years, its best such winning stretch since the one from 1975 to 1980.
A strengthening economy and better job prospects provided a significant boost to the markets. Additionally, the earnings scenario was quite strong in the first three quarters of 2017, with fourth quarter earnings expected to be up 8.6%. Moreover, the Tax Cuts and Jobs Act of 2017 lowers the corporate tax rate to 21% from 35%. Also, the Federal Reserve finally increased its benchmark interest rate by a quarter percentage point. This marks the third rate hike by Fed in this year.
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