Market Perspective for March 25, 2019

Equities opened the week flat with the Dow Jones Industrial Average gaining 0.06 percent and the Russell 2000 Index 0.46 percent. The S&P 500 and Nasdaq each fell less than 0.10 percent. Consumer discretionary, industrials and consumer staples were two of the strongest sectors: SPDR Consumer Discretionary (XLY) climbed 0.59 percent, SPDR Industrials (XLI) 0.25 percent and SPDR Consumer Staples (XLP) 0.20 percent.

iShares Edge MSCI Min Vol USA (USMV) gained 0.12 percent on the day as Waste Management (WM) and Newmont Mining (NEM) outperformed the broader market.

Apple (AAPL) shares dipped 1.44 percent today and generated the bulk of the tech sector’s decline. Traders “sold the news” after Apple unveiled a credit card and streaming services. The new credit card will work with Apple devices and Apply Pay. Its streaming service will put it in head-to-head competition with Netflix (NFLX) and Disney (DIS).

Housing starts, building permits, pending and new home sales for February will be released this week, along with the Case-Schiller home price index for January. Economists are looking for a slowdown in the annualized pace of housing starts, but an uptick in sales.

The Conference Board and University of Michigan will release their consumer surveys for March. Analysts forecast the former will climb and the latter will hold steady.

Crude oil started the week hovering around $59 a barrel. Natural gas was also steady, finishing Monday at $2.72 per mmBTU.

Bond yields extended their decline but may have made a short-term bottom this afternoon. At its low for the day, the 10-year Treasury yield hit 2.38 percent before closing at 2.42 percent. This left the 10-year yield below the 3-month Treasury yield, along with the 2-year and 5-year yields. We could see interest rates rebound if economic data comes in as forecast. Last week, the Atlanta Federal Reserve’s GDP Now model tripled its first quarter growth forecast to 1.2 percent following better than expected data.

Any finality to Brexit remains uncertain. Since the British pound and euro are major components of the U.S. Dollar Index, we could see some volatility later in the week should the March 29 hard deadline hold.

It’s worth remembering that the Brexit vote was hyped as a disaster. The British pound and equities did slide after the Brexit vote in 2016, but they rebounded in the ensuing weeks. If Britain leaves the EU, it will eventually end up in a position like that of Norway. That country is not in the European Union and uses its own currency, though it has a trade agreement with the EU.

Red Hat (RHAT), Carnival (CCL), FactSet Research (FDS), KB Home (KBH), Vale SA (VALE), Lululemon (LULU), Lennar (LEN), Paychex (PAYX), Five Below (FIVE), Accenture (ACN) and CarMax (KMX) are among the larger companies reporting earnings this week.

 

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