Market Perspective for March 31, 2017

Equity markets rallied this week, led by the financial sector’s 2 percent advance. SPDR S&P Regional Banking (KRE), performed particularly well, climbing more than 3 percent. The S&P 500 Index gained 0.79 percent, while the Nasdaq increased 1.42 percent. The Dow Jones Industrial Average advanced 0.32 percent.
The S&P 500 Index was flat in March though it increased 5.5 percent in the first quarter. The Nasdaq returned 1.49 percent in March and 9.81 percent in the first quarter to lead index performance.
Technology and healthcare were the best performing sectors in the first quarter. Technology outperformed the broader S&P 500 Index by 5 percent and healthcare by nearly 3 percent. The S&P 500 energy sector underperformed the broader index by 12 percent.
Fourth quarter GDP was revised higher to 2.1 percent. Strong consumer spending offset a worsening trade deficit. Corporate profits rose 9.3 percent in 2016. GDP growth for the full year was 1.6 percent. These numbers are third and final estimates.
Conference Board Consumer Confidence surged to 125.6 in March, well above 116.1 from a month ago and estimates of 114.1. On Friday, the University of Michigan Consumer Confidence survey dipped slightly to 96.9.
Pending home sales increased 5.5 percent in February. Analysts believe home sales could grow even faster, but low inventory is limiting sales growth. Home prices are rising as a result, and new home construction remains robust. The Case-Schiller home price index climbed 5.9 percent year-on-year in January.
The personal consumption expenditures (PCE) report showed personal income in the United States grew 0.4 percent in February, in line with expectations. Consumer spending increased 0.1 percent, below forecasts. Economists blamed a delay in tax refunds. Core PCE inflation increased 0.2 percent in February and 1.8 percent year-on-year.
The Chicago PMI climbed to 57.7 in March, the highest reading since January 2015. Any number above 50 signals expansion in the upper Midwest’s manufacturing sector.
West Texas Intermediate crude oil rallied past $50 a barrel on Thursday after weaker-than-expected inventory. Rising U.S. production didn’t faze the market this week, nor did the news that U.S. shale producers may be able to quickly add 300,000 bpd in new production.
Initial claims for unemployment were 258,000 last week, down slightly from the prior week’s number. Initial claims remain near four-decade lows and well below the 300,000 associated with full employment.
In earnings news, Carnival (CCL) beat estimates by 3 cents at $0.38 per share. Revenues were in line with forecasts. Shares hit a new all-time high following the results. Lululemon (LULU) earned $1.00 per share, missing earnings estimates by a penny. Shares tumbled 23 percent after executives said the year was off to a “slow start.” Paychex (PAYX) beat earnings estimates and missed on revenues, sending shares down 3 percent. On Friday, Blackberry (BBRY) reported a loss of $0.10 per share, missing expectations, but much better than the year-ago quarter loss of $0.45 per share. BBRY rallied in Friday trading.

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