Market Update: Fri, Mar 1, 2019 | LPL Financial Research

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Daily Insights

Here comes March. The S&P 500 Index is off to its best start to a year after the first two months since 1991 (and 1987 for the Dow), and there could be more good news for bulls ahead. Over the past 10 and 20 years, March has been the S&P 500’s second-strongest month of the year, and April has been quite strong recently as well. Today on the LPL Research blog, we will take a closer look at March seasonality.

Stalling out? The S&P 500 is heading for a slight loss for the week as of Thursday’s close, but moves over the past few days have been historically small. The benchmark has moved an average of 0.1% on a closing basis this week, poised for the quietest week since July 2017. Technically, the S&P 500 remains beneath strong resistance from the 2,800 level, and we expect the first level of support near the 200-day moving average around 2,750. One thing is for sure: in the near-term, stocks are quite overbought. The S&P 500’s recent run has been especially strong: the index has closed above its 10-day moving average for 38 consecutive days – the longest streak in 9 years!

Personal spending slides. Personal spending dropped 0.5% month over month, its biggest monthly slide since September 2009, according to data released this morning. Today’s report reinforces the disappointing December retail sales report, which showed U.S. consumer activity slid the most in 10 years month-over-month. Global headwinds have weighed on consumer confidence over the past few months, so lower spending was somewhat expected (although the magnitude of the drop has been  surprising). However, we expect consumer spending to bounce back in the first half of this year amid lingering effects from fiscal stimulus, a patient Federal Reserve (Fed) and a strong rebound in equity markets.

Core PCE remains stable. Lower personal spending data wasn’t enough to derail core personal consumption expenditures (PCE), the Fed’s preferred inflation gauge. Core PCE grew 1.9% year over year in December, just below the Fed’s 2% target for the measure. Domestic pricing and wage growth remains manageable, showing that Fed policy is appropriate given economic conditions. We expect the Fed to pause rate hikes through the end of this year. However, we could see an additional rate hike, likely in the second half of this year, if economic growth picks up and inflation accelerates too quickly.

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Friday

  • Core PCE (MoM, Dec)
  • Markit US Manufacturing PMI (Feb)
  • ISM Manufacturing PMI (Feb)
  • University of Michigan Sentiment Index (Feb)
  • Japan Consumer Confidence Index (Feb)
  • Germany Unemployment Claims Rate (Feb)
  • Eurozone Unemployment Rate (Jan)
  • Eurozone CPI Report (Feb)

IMPORTANT DISCLOSURES

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Index data obtained via FactSet

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