Market Perspective for March 19, 2018

Equities closed lower on Monday following a Facebook privacy scandal. Shares declined as much as 8 percent on the day, closing with a loss of 6.7 percent. Facebook is 5.5 percent of PowerShares QQQ (QQQ) and 6.9 percent of SPDR Technology (XLK).

Economic data will include Wednesday’s Federal Open Market Committee meeting. Investors expect Federal Reserve officials will vote to raise interest rates 25 basis points. The odds of a rate hike are 95 percent in the futures market.

February new and existing home sales, the flash PMIs for March, weekly jobless claims, and durable goods orders will be out later in the week. Last week, housing starts and building permits missed expectations, but economists are more optimistic about this week’s reports. Existing home sales are forecast to match January’s annualized pace and new home sales are expected to jump from an annualized pace of 593,000 in January to 630,000 in February.

Defense stocks were among the strongest performers on Monday. iShares U.S. Aerospace & Defense (ITA) gained 0.27 percent.

Overseas, the Bank of England will meet this week. On Monday, the British pound jumped after a breakthrough in Brexit negotiations with the European Union. Chinese housing price growth slowed in February.

The euro was up slightly after a European Central Bank source said the bank was “comfortable” with the market expecting a rate hike in the first quarter of 2019. If other leaks are accurate, the ECB plans to taper quantitative easing from September to December before starting its rate hike cycle. Euro strength translated into U.S. Dollar Index weakness, but WisdomTree Bloomberg U.S. Dollar Bullish (USDU) was up 0.08 percent on the day as emerging-market currencies weakened.

Earnings season is largely over, but Oracle (ORCL) and FedEx (FDX) will report this week. Oracle is the second-largest holding in iShares North American Software (IGV). Analysts are optimistic about FedEx’s per-share profits. They project a 30 percent increase from the year-ago quarter. Other companies reporting this week will include General Mills (GIS), Nike (NKE), Accenture (ACN), Micron Technology (MU).

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