Market Perspective for March 5, 2018

Equities opened the week sharply higher on Monday as interest rates climbed. Most major indexes gained 1 percent on the day. The 10- and 30-year Treasury yields rallied during the day, erasing last week’s losses.

Financials benefited from rising rates and led sector performance on Monday. Banking stocks approached 52-week highs. Shares of Netflix (NFLX) hit a new 52-week high, pulling SPDR Consumer Discretionary (XLP) higher on the day. Utilities and real estate were also strongest sectors on the day, although those gains appear to be a corrective move within a larger downturn. iShares U.S. Home Construction (IT) also shrugged off rising rates, gaining more than 1 percent on the day.

Biotechnology stocks saw solid gains on the day, while Internet funds pushed to new 52-week highs.

The ISM services PMI hit 59.5 in February, beating expectations of 58.9. Releases set for later this week include January factory orders (forecast to fall 1.4 percent), trade deficit ($55.1 billion) and consumer credit. Weekly jobless claims are expected to remain near four-decade lows. Friday will bring the February employment report. The consensus calls for 210,000 new jobs and unemployment falling to 4.0 percent, with average hourly earnings rising 0.2 percent.

Overseas, the Royal Bank of Canada will meet on Wednesday and is expected to hold rates steady. The Bank of Japan and European Central Bank are also expected to leave monetary policies unchanged this week. Chinese inflation data is scheduled for Friday.

Italian stocks fell on Monday as investors weighed the risk of a 5-Star and League coalition following Sunday’s election, but currency traders held back. The euro was flat and traded in a narrow range on Monday.

The yen weakened slightly on Monday and lifted the U.S. Dollar Index. Crude oil rallied past $62 a barrel, making up ground it lost to larger-than-expected inventory builds. Grains have rallied strongly in recent trading sessions. PowerShares DB Agriculture (DBA) hit a 7-month high on Monday. Soybeans are near their 52-week high, while wheat and corn are trading at their highest levels since July.

Retail earnings season is in full swing this week with Target (TGT) headlining on Tuesday. Analysts are looking for $1.39 per share, down from $1.45 in the year-ago quarter. Costco (COST) is expected to grow earnings to $1.45 per share, up from $1.17 last year.  Ross Stores (ROST), Urban Outfitters (URBN), Dollar Tree (DLTR), Abercrombie & Fitch (ANF), Children’s Place (PLCE) and Big Lots (BIG) are among the other retailers reporting this week.

Non-retail companies reporting this week include H&R Block (HRB), Autodesk (ADSK), Revlon (REV), Ciena (CIEN), and AeroVironment (AVAV).

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