The first quarter is ending on a constructive note. By most indicators, equities are back to break-even territory for the year after falling 11% in the first six weeks. The strength in oil prices during that time has helped equities move higher as the fear of a global recession as abated. West Texas crude, which was hovering around $26/bbl. just a few weeks ago has shot up to around the $40 level. However, this pop in oil has sent consumer sentiment down in early March due to increased concerns that gasoline prices would inch upward during the year ahead. Also encouraging for stocks is that the transportation average has moved higher by 25% since their lows of mid-June of last year, despite the recent rise in fuel.
On Wednesday, the Federal Reserve held rates steady and reduced to two, from four, the number of times they are likely to hike short-term interest rates again this year. The report moved the dollar down vs. most currencies and sent gold prices lower, but still closing at a 52-week high mark of $1,254/oz. The Fed news was followed by a strong rally on Wall Street late in the day which continued into Thursday and Friday. For the week, the Dow Jones Industrials rose 2.3% and the S&P 500 headed higher by 1.4%. The biotech-heavy NASDAQ managed to gain just 1%. To wit, healthcare was the lone sector to see red and the NASDAQ would have been weaker if not for a relatively strong move higher in technology. Industrials, basic materials and energy were the bright spots for the market.
As for the macro economy: Housing starts rose in February. This uptick is likely to continue, as low interest rates, strong job growth and rising personal income should help retain favorable affordability ratios. Retail spending, which has been week, is starting to see signs of recovery, especially in building supplies, healthcare, clothing and sporting goods. As consumers account for nearly two-thirds of GDP, the retail buying trend is encouraging. And manufacturing is also recovering, providing some hope for improved industrial production. The caveats are still off shore with further easing by central banks in Japan and Europe signaling weak prospects for growth. On balance, bulls are still in charge and the path of least resistance for equities right now remains higher. Although markets will be closed on Friday, the final reading of fourth quarter 2015 GDP will be released and expected to be revised higher by 0.1%. Enjoy the Easter holiday.
Here is the answer to last week’s trivia question: The ticker symbol “E” belongs to what NYSE traded company? Pharmacy benefits manager Express Scripts; household battery maker Energizer Holdings; Italian energy giant Eni, SpA, or online travel company Expedia. Answer: Eni, SpA.
Today’s Trivia Question: The American Stock Exchange, founded in 1908, is? Owned by Intercontinental Exchange, Inc.; defunct; still independent and operating as The American Stock Exchange; part of the NASDAQ.