Market Update: Thursday, March 24, 2016


  • Stocks fall as oil drops back below $40. A 3.5% drop in the price of WTI crude oil caused energy and materials to lead U.S. indexes lower on Wednesday. Additional uncertainty was cast on the markets by hawkish comments from St. Louis Federal Reserve Bank (Fed) President Bullard. Defensive stocks caught a bid, as consumer staples and utilities were the only sectors to close up on the day. COMEX gold moved 2% lower, while the yield on the 10-year Treasury was pushed down 0.06% to 1.88%. Final tallies: Dow -79.98 to 17502.59, Nasdaq -52.80 to 4768.86, S&P 500 -13.09 (-0.64%) to 2036.71.
  • Investors turn defensive ahead of long weekend. U.S. equities are tracking European indexes lower as traders take profits after five weeks of gains. Dollar strength, spurred by recent hawkish comments out of the Fed, continues to pressure commodities and related stocks, which led Asian equities lower overnight; China’s Shanghai Composite led the decliners, falling 1.6%. Growing U.S. stockpiles are also contributing to further oil weakness, gold is trending back toward par, and yields on 10-year Treasuries are little changed.


  • Is the S&P 500 really overbought? There has been a lot of talk about how overbought equities are after the big run-up the past six weeks. One way to assess this is by looking at the percentage of stocks in the S&P 500 above their 50-day moving average. For only the 14th time since 1990, more than 90% of the stocks in the S&P 500 are above their 50-day moving average. Conventional wisdom suggests this means equities are extended and ripe for a pullback. The only issue is that conventional wisdom in this case is wrong, as a month later the S&P 500 is up 2.3% on average; three months later, it’s up 5.1% on average. Today on the LPL Research blog we will take a closer look at this phenomenon.
  • Win streak over? After a loss yesterday, the S&P 500 is down 0.6% for the week. With futures lower right now, this could be the first losing week after five consecutive higher weeks. In fact, if the S&P 500 is red today, it would be the first three-day losing streak since early February. Nonetheless, the S&P 500 in March is still up 5.4% for the month, so some weakness could be perfectly normal. Don’t forget, going back the past 10 years, April is the strongest month historically and March is the second strongest month. That seasonality has played out well so far.
  • New claims for unemployment rose 6,000 to 265,000 in the week ending March 19. The four-week average fell to 260,000. Claims continue to remain near historically low levels and are close to the lows seen last summer and fall, which were the lowest in 42 years (1973). Claims in the past 26 weeks are down 2,000. In the past, claims need to rise more than 75,000 over a six-month period to indicate recession, so clearly there is no recession signal from claims. The level of claims continues to point to a solid labor market. Please see the Weekly Economic Commentary, “What Do Claims Claim?” for more details
  • Core durable goods shipments and orders fall short of expectations in February; January data were revised lower. New orders for durable goods fell 2.8% in February, in-line with consensus expectations, with weakness across all categories as the lingering effects of a strong dollar and lower oil prices continue to impact the manufacturing sector. New orders of core capital goods were once again under pressure after showing a brief positive respite in January. Shipments also declined in the month. On a year-over-year basis, core capital goods orders were down 0.1% in February. While the manufacturing sector, which accounts for 12% of the domestic economy, has been under pressure for some time, there have been some signs of healing in recent days. Several reports indicated a pickup in regional factory activity in March, which combined with a stabilizing dollar and oil could relieve some pressure.
  • Key March data on jobs, consumer spending, and manufacturing highlight next week’s busy economic calendar. In the lull between the major central bank meetings of early to mid-March and the start of Q1 earnings reporting season in mid-April, markets will be assessing the health and trajectory of the U.S. and global economies. Data due out next week in the U.S. on the Institute for Supply Management (ISM) manufacturing index, vehicle sales, employment, and wages for March are crucial to that assessment. In addition, data on pending home sales, home prices, exports and imports, and construction spending in February will help to solidify Q1 gross domestic product (GDP) estimates. It’s a relatively quiet week for the Fed next week with a few hawks and a few doves on the docket, most notably New York Fed President Bill Dudley. Overseas, it’s a quiet week for central banks, China will release its March manufacturing data, Japan will release the crucial Tankan Survey for March, and data in the Eurozone and U.K. on bank lending and money supply will be closely watched.



  • Durable Goods Shipments and Orders (Feb)
  • Markit Mfg. PMI (Mar)
  • Eurozone: Markit Mfg. PMI (Mar)
  • Taiwan: Central Bank Meeting (Rate Cute Expected)
  • Japan: Tokyo CPI (Mar)
  • Japan: CPI (Feb)


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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