Market Update: Thursday, March 03, 2016


  • Markets pull ahead in late trading as oil continues to climb. The major averages all finished higher Wednesday as investors continued to rotate into this year’s underperformers, notably energy and financials. Energy stocks were led by WTI crude oil’s 2.5% advance, while more upbeat economic data (the ADP employment report) continued to bolster rate hike expectations, which boosted financial stocks. COMEX gold inched lower in the afternoon, but finished up 0.6%, while the 10-year Treasury yield gained a 0.01% to 1.85%. Final tallies: Dow: +34.24 to 16899.32, Nasdaq: +13.83 to 4703.42, S&P 500: +8.10 (+0.41%) to 1986.45.
  • Futures pause ahead of February jobs report. Futures are slightly lower to unchanged in pre-market trading as most market participants look ahead to Friday’s non-farm payroll report. It has been a busy week for economic data, with another important data point, the Institute for Supply Management (ISM) non-manufacturing survey due to be released at 10 a.m. EST today. Consensus expectations are for a level of 53, down from 53.5 in January, but still comfortably signaling an expansionary environment for the services sector of the economy. Asian markets continue to exhibit strength, with Japan and China posting overnight gains of 1.28% and 0.36%, respectively. European indexes are slightly down after markets experienced choppy trading in their morning session, as investors are digesting the recent rally in global risk assets.


  • Slight rise in jobless claims over the past week but still firmly mid-cycle. The latest reading on initial claims for the week ending February 27, at 278,000, was a 6,000 increase from the prior week. However, this is still roughly in-line with the level 26 weeks ago (281,000) and nowhere near levels indicating a potential recession. The four-week moving average fell to 270,250, the lowest since November 2015 and down 5,000 over the past 26 weeks. The data are consistent with a labor market that is still inching toward full employment. Speaking of jobs, the U.S. Bureau of Labor Statistics will release its February Employment Situation report tomorrow at 8:30 a.m. ET. The consensus is looking for an increase of 190,000 jobs and an unemployment rate of 4.9%.
  • What is sentiment saying now? The S&P 500 rallied late and closed near its high for the second day in a row. For the week, the S&P 500 is now up close to 2%, on the heels of gaining 1.6% and 2.8%, respectively, the previous two weeks. In the past three weeks the S&P 500 has gained more than 6.5%, which is the best three-week rally since the October 2014 lows. In mid-February, we noted that sentiment was extremely bearish, as the American Association of Individual Investors (AAII) Sentiment Survey was near the lowest level of bulls in 23 years. That same poll was released this morning; after eight straight weeks of more bears than bulls, it has finally reversed, showing more bulls than bears. In fact, that streak of consistent bearish sentiment was the longest since June 2012. The bulls have been beneath their long-term average of 38% for 17 consecutive weeks.
  • More evidence of Chinese slowdown. China’s services Purchasing Managers’ Index (PMI) fell to 51.2 this month, from 52.4 in January. This is still an expansion, but nonetheless, a slowdown in what has been a bright spot in the Chinese economy. The National People’s Congress is beginning now, but the real work will not start until Saturday. This meeting will set priorities, and there may be major new policy announcements. We look for structural reform as a catalyst, not simply more stimulus or a change in bank rules.



  • Non-Mfg. ISM (Feb)


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


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

Click Here for our detailed Weekly Economic Calendar


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

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