Market Perspective for March 17, 2017

Markets rallied after the Federal Reserve’s interest rate hike. The central bank also indicated it would raise rates two additional times this year. Basic materials, utilities, technology, industrials, and consumer staples led the market following the rate hike. The Nasdaq rose to within a quarter percent of its all-time high, the Dow Jones Industrial Average and the S&P 500 came within 1.5 percent of their highs.

The U.S. Producer Price Index (PPI) rose 0.3 percent in February, exceeding forecasts. The year-over-year gain was the largest in five years. The Consumer Price Index (CPI) increased 0.1 percent, as expected. The Empire State and Philly Fed manufacturing surveys showed continued economic growth in their respective regions. The March national homebuilders’ survey reached a 12-year high, reflecting confidence in the sector. February housing starts were slightly above expectations. Retail sales figures were slightly lower than the forecast of 0.2 percent.

Unemployment claims were below estimates. Initial claims have been below 300,000 for 106 straight weeks, the longest streak since 1970. The Job Openings and Labor Turnover Survey (JOLTS) for January showed a marginal increase in the number of people voluntarily changing jobs, while job openings increased from the December figure.

As expected, the Bank of Japan (BoJ) and the Bank of England (BoE) held their benchmark interest rates unchanged. The BOJ will continue its easy money policy to spur the country’s recent economic growth. The British central bank took a cautious approach as it awaits a formal Brexit. The upper chamber of parliament and the Queen gave final approval for Prime Minister Theresa May to begin the process of exiting the European Union. She’s expected to invoke Article 50 at the end of March. The People’s Bank of China (PBoC) raised borrowing costs 25 basis points with the Federal Reserve.

Tech giants Oracle (ORCL) and Adobe Systems (ADBE) delivered earnings this week. ORCL jumped almost 10 percent after beating expectations with its cloud-based business model. Shares of Adobe rose close to 5 percent after earnings and revenue topped forecasts. It also benefited from growth in its cloud-based businesses. Dollar General (DG) remained flat despite better-than-expected sales. Tiffany & Co. (TIF) shares climbed 2 percent on Friday after demand in Asia boosted sales.

Investor optimism remains high.  FactSet research reported eighteen consecutive weeks of inflows to equity ETFs for the week ending March 9th.  This indicates the market still has momentum and the bull market should continue.  The spread in sector performance is becoming increasingly relevant.  If you are looking for the sectors that are rapidly gaining ground, you should read a recent copy of my Global Momentum Guide.  Each week, we track several hundred sector and international funds, providing you the information to trade actively.  To read a recent issue, please click here. If you choose to subscribe, you next issue will be delivered first thing Monday morning.

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