All good things come to an end, and it is especially true of Wall Street. After a five week winning streak, U.S. equities took a breather and edged lower, although not by much. The holiday-shortened trading week saw the Dow Industrials lose 87 points or .5%, while the S&P 500 lost closer to 0.7%. While the NASDAQ was also lower by 0.5%, the smaller-cap Russell 2000 was in the red by 2% for the week. Most sectors were in negative territory when all was said and done, especially shares of energy producers and oil service firms, which declined 2.5% on average. Basic material and financial stocks didn’t fare much better. There was some strength in healthcare, however, gaining .75%, as well as telecom and utilities, both in the green by 0.5%. The terrorist attacks in Brussels, as we have seen in the past, did not materially shake markets both here and abroad.
In economic news, the Commerce Department reported that durable-goods orders in February fell 2.8% from January’s level and January’s decline was revised downward by 0.5%. GDP, the broadest measure of goods and services produced across the economy, was revised upward from 1% to a seasonally adjusted 1.4% annual rate in the final quarter of 2015. These up-and-down reports, along with the possibility of a slowdown in employment for March, is keeping Fed watchers on edge. There appears to be a great deal of dissension among FOMC members as to the direction of short-term interest rates with a possible hike now seen for April.
First quarter earnings season kicks off in a few weeks and the consensus is for a 7% – 8% drop in quarterly results for the companies in the S&P 500. For markets to continue higher, there needs to be a stronger showing than that as well as improved sales and earnings guidance for the remainder of the year. And for a turnaround in profits, the U.S. economy needs to pick up steam along with an uptick in China and other global economies. While there may be some moderate moves to the upside ahead for stocks, especially if the business outlook stays positive and the Fed remains supportive, the recent tragic events in Brussels point out that the global situation is dangerous and may yet prove unsettling for the markets.
Here is the answer to last week’s trivia question: The American Stock Exchange, founded in 1908, is? Defunct; owned by Intercontinental Exchange, Inc.; still independent and operating as The American Stock Exchange; or part of the NASDAQ. Answer: Owned by Intercontinental Exchange, Inc. The venerable American Stock Exchange was acquired by the New York Stock Exchange (NYSE Euronext) in 2006, which was subsequently purchased by the Intercontinental Exchange in 2013 and re-branded as NYSE Market. The iconic Amex Building at 86 Trinity Place in Manhattan was closed in December, 2008 and the trading floor of listed equities moved to the New York Stock Exchange building.
Today’s Trivia Question: The longest-sitting director for an S&P 500 listed company is? Warrant Buffet (Berkshire Hathaway); Sumner Redstone (CBS and Viacom); Charles Munger (Berkshire Hathaway); Leonard Alan Lauder (Estee Lauder Cos.).