August 13, 2017 – With Congress home for summer, second-quarter corporate earnings season over, the Federal Reserve not scheduled to meet until mid-September, and a potential debt-ceiling debate not likely until Fall, the markets focused on fears of a military confrontation between the U.S. and North Korea.  The S&P 500 Index, which had notched 15 consecutive sessions without closing up or down by 0.3% or more, fell 1.4% on August 10, its worst one-day showing in three months, before rebounding modestly the next day. For the week, the S&P 500 returned -1.4%.   The geopolitical risk caused a flight to quality with the 10 Year Treasury rallying to close at a yield of 2.19% after starting the week at 2.27%.  Additionally, Friday’s Consumer Price Index (CPI) report failed to stoke any inflation concerns.  Excluding food and energy, core CPI came in unchanged at 1.7% year-over-year.  Given the recent  inflation news, markets are pricing less than a 50% chance of a hike for the remainder of 2017.  

In Alternative Lending news, PayPal announced the acquisition of  small business lender Swift Financial — Swift has provided working capital funding for over 20,000 small businesses. PayPal will use Swift’s data and technology to improve its underwriting capabilities and expand its own working capital offering. In the public markets, OnDeck stock rose this week by as much as 17% on Monday after they released their upbeat outlook in their second-quarter earnings report. The company said they have been successful in efforts to cut costs and tighten borrowing criteria. Lending Club’s stock also experienced an 8% rise this week after posting the second-highest quarterly revenue in its history. Lending Club now expects full-year total net revenue to be in the range of $585 million to $600 million.

Opinions expressed within the commentary are general opinions of Chris Lalli and Jae Lim and are not opinions of CapAccel or SF Sentry Securities, Inc. Nothing in this commentary should be viewed as solicitation to buy or sell specific securities or a recommendation to participate in any transactions. Securities offered through SF Sentry Securities, Inc., member FINRA/SIPC.

Sources:  Payden & Rygel, TIAA-CREF, Orchard Platform