Market Update: Wednesday, March 02, 2016

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  • Stocks roar into March on strong economic data. U.S. equities rose across the board Tuesday as solid manufacturing and construction data quelled investor fears about growth here at home. The beaten-up financial sector rose more than 3%, as did technology. Utilities was the only sector down on the day, likely hurt by the rise in Treasury yields, with the 10-year note rising 0.08% to 1.83%. WTI crude oil advanced above $34/barrel, while COMEX gold closed down less than 1%. Final tallies: Dow: +348.58 to 16865.08, Nasdaq: +131.65 to 4689.60, S&P 500: +46.12 (+2.39%) to 1978.35.
  • U.S. slightly off, foreign rally continues. A report showing U.S. crude inventory hit record levels last week prompted a pullback in oil prices and U.S. equities in early trading, though a better than expected ADP employment report is helping to buoy indexes. Meanwhile, Asia turned in strong results overnight (stocks in China and Japan rose more than 4%) as traders found solace in U.S. economic data, as well as Swiss and Australian gross domestic product (GDP) figures, as a sign that a global slowdown is not imminent. European indexes are off intraday highs following oil’s retreat but are still poised for their longest winning streak in five months, while gold and Treasuries are near flat.

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  • Solid February ADP employment report should help calm U.S. recession fears and further supports Fed’s view that labor market is tightening. ADP—the nation’s largest payroll processing firm–reported this morning that its tally of private sector payrolls increased by 214,000 between January 2016 and February 2016. The February reading was well above expectations (+190,000) and an acceleration from the +193,000 reading in January. More importantly, the +214,000 reading in February and the +200,000 average gain over the past 12 months is well above the roughly 125,000 to 150,000 jobs per month cited by various Federal Reserve Bank (Fed) officials as the pace of monthly jobs gains needed to indicate “some further improvement” in the labor market. Although ADP provides an early look at payrolls each month, the report in recent years has become a less reliable predictor of the U.S. Bureau of Labor Statistics (BLS) employment report. The BLS will release the February 2016 Employment Situation report on Friday, March 4. The consensus is looking for an increase of 195,000 jobs and an unemployment rate of 4.9%.
  • Big first day of month. The S&P 500 bounced back in a big way yesterday, gaining more than 2% for the third time this year. It gained 2% four times last year and twice in both 2014 and 2013. This was the best first day of a month since January 2013. In fact, the last three times the first day of the month gained more than 2% (January 2013, December 2010, and September 2010), the rest of the month gained 2.4%, 4.3%, and 5.6%, respectively.

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Wednesday:

  • ADP Employment (Feb)
  • Beige Book
  • Brazil: Central Bank Meeting (No Change Expected)
  • China: Caixin Mfg. PMI (Feb)
  • China: Caixin Non-Mfg. PMI (Feb)

Thursday:

  • Non-Mfg. ISM (Feb)

Friday:

  • Employment Report (Feb)
  • China: Chinese Government Announces 2016 GDP Target

Sunday:

  • Japan: Bank of Japan’s Kuroda Speak in Tokyo


Click Here for our detailed Weekly Economic Calendar

 

Important Disclosures

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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