Market Update: Wednesday, February 24, 2016


  • Stocks turn negative for month as oil falters. Major indexes slipped more than 1% on Tuesday after hopes of a production freeze between OPEC and non-OPEC states all but fell apart, driving WTI crude oil prices down nearly 5%; a downbeat reading on consumer confidence also sapped appetite for risk assets. JP Morgan’s disclosure of a more than 60% increase in loan loss reserves tied to energy dragged on financials, while technology stocks also fell sharply following negative news on the mergers and acquisitions front and weakness in sector leader Apple. Cash flowed into Treasuries as traders exited equities, pushing the yield on 10-year Treasury Notes down 0.07% to 1.74%; COMEX gold rose 1% and the dollar also moved higher. Final tallies: Dow -189.08 at 16431.44, Nasdaq -67.02 at 4503.52, S&P 500 -24.24 (-1.25%) at 1921.19.
  • Markets lower amid ongoing lockstep with oil. Equities are continuing Tuesday’s declines as oil moves back toward the $30 mark, unable to sever ongoing ties as persistently low prices raise concerns about falling global growth. Consequently, government bonds are in demand; Treasury yields are falling, as are safe-haven currencies such as the dollar and yen, which weighed on the Nikkei Index overnight. Commodity-linked stocks are leading to the downside in European trading as indexes bounce around their worst levels of the session. Gold, meanwhile, continues its ascent as traders seek shelter amid the sell-off.


  • The S&P 500 and crude oil continue to trade together. One day after both saw nice gains, stocks and crude oil reversed lower yesterday. This is nothing new, as most days this year the S&P 500 has followed the path of crude oil. Turning to history, going back to 1983, we found that 51% of all days saw both crude oil and the S&P 500 trade in the same direction on any given day (both higher or both lower). What is amazing about this year is that ratio has moved up–74.3% of all days the two assets have moved together. This is the highest correlation (data dating back to 1983), above the previous record of 72.4% in 2012.



  • Housing Starts and Building Permits (Jan)
  • FOMC Minutes
  • UK: Jobless Claims and Unemployment Rate (Jan)
  • China: CPI (Jan)



  • CPI (Jan)
  • EU Leaders Summit


  • Japan: Nikkei Japan Mfg. PMI (Feb)

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The economic forecasts set forth in the presentation may not develop as predicted.

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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.

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