Market Perspective for March 2, 2018

Telecom, consumer staples and technology led sector performance. iShares US Telecommunications (IYZ) declined 0.81 percent, SPDR Technology (XLK) 0.83 percent and SPDR Consumer Staples (XLP) 1.16 percent. iShares PHLX Semiconductors (SOXX) gained 1.05 percent on the week.

Economic data was strong this week. New home sales fell to an annualized pace of 593,000, within the uptrend in place since 2011. Fourth-quarter GDP growth was revised to 2.5 percent, in line with expectations. Personal income grew 0.4 percent in January. The ISM Manufacturing PMI jumped to 60.8 in February as the sector strengthened. January construction spending was strong. The Conference Board’s consumer confidence index rose to 130.8, beating expectations, while the University of Michigan’s consumer sentiment survey was down slightly to 99.7.  Consumer and construction data lifted the Atlanta Federal Reserve’s GDP Now forecast from 2.6 percent to 3.5 percent.

While rate hike expectations increased, long-term bond yields remained in a downtrend since making a new high on February 21st. The 10-year Treasury yield fell to 2.86 percent, while the 30-year Treasury yield declined to 3.13 percent. iShares Barclays 20+ Year Treasury (TLT) rose 0.38 percent. Although interest rates declined, SPDR Utilities (XLU) fell 2.76 percent.

The U.S. Dollar Index was up as much as 1 percent midweek before falling on Thursday after President Trump announced tariffs on steel and aluminum. It finished the week with a small increase of 0.06 percent.  The S&P 500 Index extended its outperformance versus foreign markets. SPDR S&P 500 (SPY) fell 2.01 percent, iShares MSCI EAFE (EFA) slid 2.69 percent and iShares MSCI Emerging Markets (EEM) slumped 3.24 percent.

Crude oil declined 3.2 percent for the week after gasoline inventories rose more than expected. PowerShares DB Agriculture (DBA) increased 1.52 percent. VanEck Agribusiness (MOO) lost 3.34 percent on the week.

Anheuser-Busch Inbev (BUD) and Salesforce.com (CRM) both rallied on strong earnings this week, while Lowe’s (LOW) fell following missed earnings. Anheuser-Busch increased earnings 8.2 percent last year. Salesforce.com increased earnings by 25 percent. Lowe’s beat revenue and same store sales estimates, but falling margins cut into profits. The company earned 74 cents per-share, missing estimates by 15 percent.

 

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