- Equities slip after healthcare reform shelved. (10:18 am ET) U.S. indexes are tracking global stocks lower this morning after Congress was unable to push through the American Health Care Act, casting some uncertainty over prospects for tax reform as well. On Friday, the S&P 500 (-0.1%) closed modestly lower, dragged down by materials (-0.9%) and energy (-0.5%); utilities (+0.4%) was the best performing sector. Overnight, Asian markets were led lower by Japan’s Nikkei (-1.4%) on yen strength; Hong Kong’s Hang Seng (-0.7%) and China’s Shanghai Composite (-0.1%) fared better. Stocks are also lower across the board in Europe, notably in Germany’s DAX (-0.9%) and Italy’s MIB (-0.9%). Elsewhere, the recent weakness in WTI crude oil ($47.21/barrel) continues, while the risk-off sentiment is boosting COMEX gold ($1262/oz.) and Treasuries, lowering the yield on the 10-year Note by five basis points (0.05%) to 2.35%.
- Our Final Four factors in today’s Weekly Market Commentary. With college basketball’s Final Four set, this week we share our “Final Four factors” for the stock market in 2017. We expect a hard-fought battle between these factors and market risks. But when the “tournament” is over on December 31, depending on the path of policy out of Washington, D.C., we expect the S&P 500 to be at or above current levels.
- Economic Growth – We continue to expect a modest pickup in economic growth in 2017 to near 2.5%, based on gross domestic product (GDP), supported by increasing business investment, steady consumer spending gains, and, later in the year, pro-growth fiscal policy to be enacted.
- Earnings – We expect high-single-digit S&P 500 earnings growth in 2017, supported by better U.S. economic growth, rebounding energy sector profits, a stable U.S. dollar, and resilient profit margins.
- Corporate Tax Reform – Corporate tax reform, which remains the centerpiece of the Trump economic agenda, is still likely to get done in the next year despite the failure to get the healthcare bill through the House last week. The Trump administration will immediately pivot to tax reform, though a comprehensive overhaul will be difficult to achieve.
- The Fed – We expect the Federal Reserve (Fed) to hike interest rates twice more in 2017 following the Federal Open Market Committee’s (FOMC) rate hike on March 15. We are encouraged by the Fed’s acknowledgement of the improved economic outlook and its stated plan to hike rates gradually.
 We expect S&P 500 gains to be driven by: 1) a pickup in U.S. economic growth partially due to fiscal stimulus; 2) mid- to high-single-digit earnings gains as corporate America emerges from its year-long earnings recession; 3) an expansion in bank lending; and 4) a stable price-to-earnings ratio (PE) of 18 – 19.
- Down seven in a row. The Dow closed lower on Friday for the seventh consecutive session. The last seven-day losing streak was ahead of the U.S. election, and it hasn’t been down eight in a row since August 2011. The S&P 500 meanwhile has closed lower six of the past seven days. Taking a closer look at the Dow’s seven-day losing streak, it has been green at some point each day. Also, the total loss during the streak is only 1.7%. To put this in perspective, since 1980, there have now been 20 seven-day losing streaks. The average drop during the previous 19 was 7.3% and the current drop of 1.74% ranks as the second smallest loss.
- Evans (Dove)
- GDP (Revision) (Q4)
- Eurozone: Industrial, Services & Consumer Confidence (Mar)
- China: Mfg. & Non-Mfg. PMI (Mar)
- Personal Income (Feb)
- Kashkari (Dove)