- Inflation, earnings, and oil pull market in different directions. Higher than expected consumer prices stoked concerns that the Federal Reserve Bank (Fed) could potentially justify a rate hike at some point this year. Utilities and telecom stocks fell on the news, but the energy and materials sectors led to the downside as WTI crude oil slid another 3.5%. Consumer discretionary outperformed despite weakness in the retail space, while technology shares helped the Nasdaq Meanwhile, 10-year Treasury yields ticked up a 0.01% to 1.75%; COMEX gold and the dollar fell. Final tallies: Dow -21.44 at 16391.85, Nasdaq +16.89 at 4504.36, S&P 500 -0.05 (0.0%) at 1917.71.
- U.S. stocks look to open strong. Global stocks are mostly higher overnight and U.S. futures are pointing to a strong open following their best week of the year. Oil is providing some support, with futures up close to 4% pre-market, but other catalysts are murky. China saw some buying after reshuffling its senior market regulator, while disappointing preliminary February Purchasing Managers’ Index (PMI) data for the Eurozone and Japan may be providing support on the prospect of continuing friendly central bank policy. The dollar is strengthening, helped by a falling British pound as Brexit fears rise, while the overall risk-on sentiment is pushing Treasury yields higher and gold lower.
- Best week of the year. The S&P 500 had its best week of the year last week, gaining 2.8% (not bad considering it was only a four day week). This was the best weekly gain since the week before Thanksgiving. On Friday, the S&P 500 lost only 0.05 points, making it the smallest daily move in more than 16 months. Even though Friday didn’t show it, volatility continues to rule in 2016; out of the first seven weeks this year, only one week failed to move at least 1% (higher or lower). The gains last week happened early in the week though, as Thursday and Friday trading was muted. In fact, there wasn’t a 1% move (up or down) on either Thursday or Friday. The last time the S&P 500 went three consecutive days without a 1% move was early December.
- Nine months without a new high. The S&P 500 last closed at a new all-time high on May 21, 2015, nine months ago. This comes out to 188 trading days without a new high. From late March 2013 until the last new high in May 2015, the S&P 500 never went more than 40 trading days without a new all-time high. Of course, there was a 25-year streak without a new high from 1929 to 1954, so the current nine-month break may not be so bad.
- Next phase for Europe. On Friday, the European Council agreed to accept renegotiated terms for British membership in the European Union (EU). This is considered a victory for the government of U.K. Prime Minister David Cameron, which has announced a referendum on whether the U.K. should remain a member of the EU. Currently, opinion polls suggest that the British public is split fairly evenly on this issue. However, the “pro-EU” forces, including Prime Minister Cameron himself, have been silent in the public discussion. Now that the European Council has voted, the public debate will be more balanced.
- ECB’s Draghi Speech in Brussels
- China: Imports and Exports (Jan)
- Housing Starts and Building Permits (Jan)
- FOMC Minutes
- UK: Jobless Claims and Unemployment Rate (Jan)
- China: CPI (Jan)
- Philadelphia Fed Mfg. Index (Feb)
- Leading Indicators (Jan)
- Williams (Dove)
- EU Leaders Summit
- CPI (Jan)
- EU Leaders Summit
- Japan: Nikkei Japan Mfg. PMI (Feb)
Past performance is no guarantee of future results.
The economic forecasts set forth in the presentation may not develop as predicted.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Stock investing involves risk including loss of principal.
Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.
Treasury inflation-protected securities (TIPS) help eliminate inflation risk to your portfolio, as the principal is adjusted semiannually for inflation based on the Consumer Price Index (CPI)—while providing a real rate of return guaranteed by the U.S. government. However, a few things you need to be aware of is that the CPI might not accurately match the general inflation rate; so the principal balance on TIPS may not keep pace with the actual rate of inflation. The real interest yields on TIPS may rise, especially if there is a sharp spike in interest rates. If so, the rate of return on TIPS could lag behind other types of inflation-protected securities, like floating rate notes and T-bills. TIPs do not pay the inflation-adjusted balance until maturity, and the accrued principal on TIPS could decline, if there is deflation.
Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk.
Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.
High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors.
Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply.
Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.
Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.
Technical Analysis is a methodology for evaluating securities based on statistics generated by market activity, such as past prices, volume and momentum, and is not intended to be used as the sole mechanism for trading decisions. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns and trends. Technical analysis carries inherent risk, chief amongst which is that past performance is not indicative of future results. Technical Analysis should be used in conjunction with Fundamental Analysis within the decision making process and shall include but not be limited to the following considerations: investment thesis, suitability, expected time horizon, and operational factors, such as trading costs are examples.
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