Market Update: Tuesday, March 8, 2016

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  • Indexes mixed despite continued gains in oil. A 5.5% increase in oil prices wasn’t enough to lift stocks on Monday, as the broad indexes showed signs of exhaustion to begin the week. WTI crude oil’s move helped energy stocks, which rose 2.4%; but the gains were offset by losses in consumer staples and the heavily weighted technology sector, which both finished down more than 0.6%. COMEX gold prices advanced 0.3%, as did Treasury yields with the 10-year closing down 0.02% to 1.9%. Final tallies: Dow +67.18 to 17073.95, Nasdaq -8.77 to 4708.25, S&P 500 +1.77 (0.09%) to 2001.76.
  • Most global markets weaker on Chinese data. U.S. futures are down approximately 0.4% in the pre-market, in sympathy with overnight weakness across most major markets. The catalyst for the weakness was poor data out of China, where exports for the month of February were down 25.4% year over year. Consensus expectations were for a contraction of 14.5%. The major European indexes are down roughly 0.2-0.3%. Japanese stocks finished down 0.76%, but Chinese stocks eked out a small gain of 0.1% after selling off sharply on the release of the export data. Treasury yields have pulled back sharply on the weaker sentiment across the globe as 10-year rates have fallen nearly 6 basis points this morning. In the commodity complex, both gold and oil are adding to gains with prices over $1,273 and $38 per barrel in early spot trading.

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  • Comeback kids. Two of the biggest sore spots in the market late last year and early in 2016, energy and high-yield bonds, have staged an impressive comeback on the recent rebound in oil and have both moved into positive territory year to date. The S&P 500 energy sector has returned 4.3% year to date (after being down as much as 13.3% in January), ahead of the 1.6% loss for the S&P 500 and oil’s 2% advance. The Barclays High Yield Bond Index has returned 1.8% year to date, moving ahead of the broad bond market index (Barclays Aggregate), up 1.7%.
  • Another green day. The S&P 500 managed to eke out a gain yesterday, marking its fifth consecutive higher session. This is the first five-day win streak since the early October lows last year. The last six-day win streak was back in June 2014. This is officially the 50th five-day win streak since the March 2009 lows, and the average gain during those streaks has been 2.96%. The recent five-day win streak came in at 3.60%. For reference, the October streak came in at 5.59%, which was the best five-day win streak return in five years. Lastly, small caps have been on fire, with the Russell 2000 Index also up five straight days, but up 5.83% over this time frame. That is the best return during a five-day win streak for small caps since December 2011. Remember though, small caps also lead on the way down, so they are bouncing back more now.
  • Small business optimism declines. The NFIB Small Business Optimism Index fell to a two-year low in February, slipping to 92.9, despite consensus expectations of January’s 93.9 improving to 94.2. Plans for business investment and hiring remained strong, but weakening earnings and sales expectation trends pulled the overall index down. Our expectations of near-trend economic growth for the U.S. in 2016 would likely be supportive of small businesses, which are more domestically focused.

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Tuesday:

Wednesday:

  • Wholesale Trade (Jan)
  • Canada: Bank of Canada Meeting (No Change Expected)
  • Malaysia: Central Bank Meeting (No Change Expected)


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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