Market Update: Friday, April 1, 2016


  • Stocks tread water ahead of jobs report. Indexes closed flat on Thursday as investors waited for further clarity regarding the state of the U.S. economy. Despite the S&P 500 finishing down only 0.2%, utilities was the only sector to advance on the day. WTI crude oil closed near flat, moving up 0.10% to $38.34/barrel and COMEX gold gained 0.75%. Lastly, the 10-year Treasury yield continued its slide to 1.79% and is now down more than 10% from its March high. Final tallies: Dow -31.57 to 17685.09, Nasdaq +0.57 to 4869.85, S&P 500 -4.19 (-0.20%) to 2059.74.
  • Stocks sliding despite solid jobs report. Indexes were tracking lower ahead of March’s nonfarm payrolls report and remain in negative territory early in the session despite generally strong data. European markets are trading near one-month lows as falling oil prices weigh on energy shares. Stocks in Asia also fell, led by a 3.6% slide in the Nikkei Index, following a surprise drop in manufacturing sentiment to three-year lows. Conversely, China’s Shanghai Composite overcame a string of S&P credit downgrades to eke out modest gains thanks to signs of improvement in the manufacturing sector. Meanwhile, gold is ticking lower, while Treasuries inch higher.


  • Solid March jobs report, but signs of a slowdown in job creation in the details. The U.S. economy added 215,000 net new jobs in March, very close to the consensus expectation of a 205,000 increase. The unemployment rate rose 0.1% from 4.9% in February to 5.0% in March, as the participation rate inched higher. The consensus expected a 4.9% unemployment rate. The payroll job count and the unemployment rate are culled from two separate surveys. Over time, the two surveys line up, but over short time frames, it’s common that the nonfarm payroll job count can be robust even as the unemployment rate rises. Wages rose faster than expected, posting a 2.3% year-over-year increase in March, accelerating from the 2.2% gain in February. The consensus was looking for a 2.2% gain in March. Elsewhere in the report, there were few, if any, noticeable distortions due to the warmer than usual March or the early Easter, and revisions to prior months’ data were minimal. The economy continues to create 200,000+ jobs per month, well above the 125,000 or so needed to keep pushing the unemployment rate lower. The one concern in the report are the recent soft readings in the temporary help supply category of jobs, which rose 4,000 in March but is down 65,000 for the first three months of the year, the weakest three-month showing since 2009. 
  • Good-bye March. The S&P 500 ended the month of March with a 6.6% gain, the largest monthly gain since October 2015. It was the best March since 2009. The S&P 500 dropped 1% only once during the entire month and 15 days were positive, the highest number of positive days for any month since October 2013. For the quarter, the S&P 500 was up 0.8%, which is all the more impressive considering at the lows it was down more than 10%. In fact, this was the first quarter since the Q4 1933 to see a reversal like that. The quarter ended with 13 straight days without a 1% move (up or down). Considering 26 of the first 48 days in 2016 had at least a 1% move, the disappearance of volatility is amazing.
  • Hello April. Going back the past 10 years, April is the strongest month on average for the S&P 500, with a 2.7% gain. March is actually the second strongest month, so seasonality is off to a nice start. April has been positive 9 of the past 10 years, with the only blemish a 0.8% drop in 2012. Lastly, going back to 2002, 10 separate months have gained at least 6% (like March just did) and the following month was higher 8 times with an average gain of 3.0%.
  • OPEC skepticism warranted. A Saudi official reiterated that the country will only freeze output if Iran and other major oil producers also agree. We expect Iran to continue to ramp up production to pre-sanction levels, which, along with a fragmented OPEC, makes any global agreement very unlikely. U.S. production has fallen about 8% from the peak and will have to do most of the heavy lifting to balance the oil market, likely in late 2016.



  • Employment Report (Mar)
  • ISM Mfg. (Mar)
  • Consumer Sentiment and Inflation Expectations (Mar)
  • Vehicle Sales (Mar)
  • Mester (Hawk)
  • Germany: Retail Sales (Feb)
  • Japan: Vehicle Sales (Mar)


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Past performance is no guarantee of future results.

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

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