Market Update: Friday, March 24, 2017


  • U.S. equities try to trim weekly losses. (9:55am ET) Domestic markets are moving higher in early trading following yesterday’s session in which the S&P 500 was unable to hold on to midday gains, closing lower by 0.1%. Healthcare (-0.4%) and energy (-0.4%) were the largest movers to the downside, while lightly weighted real estate (+0.8%) advanced. Overseas, Asian markets rose despite Thursday’s lackluster session in the U.S.; the Nikkei (+0.9%), Shanghai Composite (+0.6%), and Hang Seng (+0.1%) all posted gains. Meanwhile, European stocks are lower midday (STOXX 600 -0.3%) despite data showing Eurozone business activity grew in February at its fastest pace since 2011, according to flash Purchasing Managers’ Index (PMI) data. Elsewhere, WTI crude oil ($47.98/barrel) is up modestly but likely to end the week lower, COMEX gold ($1245/oz.) continues to pare early-week gains, and the yield on 10-year Treasuries is little changed at 2.42%.


  • New home sales climb. New home sales data for February released yesterday took some of the sting out of the disappointing existing home sales and flat home prices reported earlier this week. New home sales grew 6.1%, topping consensus expectations, with January revised modestly higher. Rising mortgage rates are putting some pressure on home sales, but an improving labor market and potential economic acceleration have kept the market on a steady growth path, with the prospect of rising household formation adding a possible demographic tailwind.
  • Mixed durable goods report. Orders for durable goods in February increased by a better-than-expected 1.7%, following January’s solid and upwardly revised 2.3% advance. “Core” durable goods (excludes transportation and defense) dipped 0.1%, disappointing relative to the 0.5% increase expected by Bloomberg consensus. However, the data series is lumpy, and a three-month annualized growth rate shows a strong 9% increase, suggesting that capital investment, which may still get a policy boost from Washington, D.C., is showing some increased strength. Also note that core durable goods shipments for February, which go into the GDP calculation, were a net positive (+1%) and support Q1 GDP growth in line with expectations in the 1-2% range.
  • European PMI data came in better than expected. Data improved across the board, with increases above expectations for manufacturing and services PMI in both Germany and France. The broad manufacturing PMI was 56.2 and services PMI 56.5, the highest readings in nearly six years. This data tends to lead other economic data, suggesting that the market may be right to look past the weaker economic data in Europe for Q4 2016. Strong leading data supports both increased GDP forecasts, as well as expectations for significant earnings growth for 2017.
  • GDP revision and consumer spending highlight upcoming economic calendar. In the week ahead, we will receive revised gross domestic product (GDP) data, consumer spending for February 2017, and additional housing data (pending home sales, Case-Shiller home prices). Revised GDP for Q4 2016, due Thursday, March 30, is expected to be revised up slightly from 1.9% to 2.1% according to a consensus of economists from Bloomberg. Markets are interested in how this report translates into early 2017; Federal Reserve (Fed) models see slower growth in the 1-2% range for the first quarter of 2017. Market participants will look to the latest consumer spending data for clues as to whether recent steady consumer spending will continue. In addition, several speakers will keep the Fed in focus, and we receive personal income (wage) data for February. Looking overseas, China reports its manufacturing PMI on Thursday


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  • Durable Goods Orders and Shipments (Feb)
  • Markit Mfg. PMI (Mar)
  • Eurozone: Markit PMI (Mar)


  • China: PBOC’s Zhou Speech


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