Market Perspective for March 9, 2018

Equities rallied sharply this week, led by the Russell 2000 Index’s 4.17 gain. The Nasdaq climbed 4.2 percent on the week, the S&P 500 3.5 percent, and the Dow Jones industrial Average gained 3.35 percent. SPDR Industrials (XLI) jumped 4.42 percent, with most gains coming in the wake of President Trump’s announcement of steel and aluminum tariffs. A flat tariff of 25 on steel imports and 10 percent on aluminum imports will begin in two weeks.

SPDR Technology (XLK) rallied 4.18 percent this week. The sector hit a new all-time high on Friday. The semiconductor, Internet, networking and software subsectors also finished the week at a new all-time high.

SPDR Financials (XLF) climbed 4.50 percent after a strong jobs report sent interest rates and rate hike expectations higher. The U.S. economy created 313,000 jobs in February, blowing away expectations of 225,000 and well above 239,000 in January. Construction, retail and manufacturing created the most jobs. After last month’s gains, retail employment is back to a new all-time high despite brick-and-mortar struggles.  Unemployment held steady at 4.1 percent. The only miss in the data was a 0.1 percent increase in hourly earnings. Economists forecast a 0.2 percent increase.

Weekly jobless claims hit 231,000 last week, up from 210,000 a week earlier, but still near four-decade lows. January wholesale inventories climbed 0.8 percent, a positive move for first-quarter GDP. The 10-year Treasury yield ended the week at 2.89 percent.

Canadian and Japanese central banks left policies unchanged this week. The European Central Bank also left policy unchanged but eliminated its easing bias. Rumors of a short taper between September and year-end also emerged, with a rate hike in 2019. Currency traders responded by selling the euro against the U.S. dollar.

SPDR S&P 500 (SPY) beat iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM). SPY rose 3.60 percent, EFA 1.96 percent and EEM 3.41 percent. This marks the fifth consecutive week of SPY beating EFA, and the eighth week of the past nine.

Crude oil rose to $62 per barrel this week. Crude has traded between $66 and $58 a barrel since the end of January. Agricultural commodities pulled back after a strong rally this week. PowerShares DB Agriculture (DBA) declined 0.21 percent on the week and 1.4 percent from the Monday high. Higher agricultural prices pushed China’s consumer inflation up 1.2 percent in February, but weaker commodity prices sent producer prices down 0.1 percent for the month.

Shares of Target (TGT) slumped this week after it missed earnings estimates by one penny. The dip in Target dragged on SPDR S&P Retail (XRT). It finished the week with a small gain of 0.35 percent.

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