Weekly market update
The major averages look to extend last week’s rally after a strong jobs report on Friday, which eased lingering concerns over inflation and possibly the prospect of the FED raising rates faster.
All of the major averages finished the week in positive territory, and the NASDAQ erased all of February’s losses and closed at a new all-time high.
It wasn’t without drama with tariffs, trade wars, inflation, political shake-ups and higher interest rates in the headlines which could threaten the global growth we are seeing.
We are in the best environment for global trade in more than a decade and the economic trade and the earnings backdrop is the best it’s been in a very long time, but with those threats, the backdrop could become a bit cloudier – over the past 5 trading days there has been talk of the worst trade war since the Great Depression and the head of the National Economic Council stepping down and stocks are headed to the moon. Makes perfect sense right – if things get worse, there is no telling how high stocks will go.
ECONOMY
Following up last week’s good data, we got another round of very positive data.
The biggest news came from Friday’s non-farm payrolls report where we added 313,000 new jobs in February (remember it’s a short month). 313,000!
It was also an important read on average hourly earnings which lowered inflationary fears after the spike in January. This is a key measure of worker wages in the U.S. They were up 0.1% in February from a month earlier, below economist projections of 0.2% and January’s 0.3% rise. From a year earlier, wages were up 2.6%, a slowdown from January’s 2.9% growth. This jobs report shows the market overreacted a month ago, inflation is not coming through.
INTERNATIONAL
Across the pond, we also saw stocks rally. Italian election concerns faded pretty quick and European stocks rallied along with their U.S. counterparts. The ECB’s latest comments didn’t seem to have a lasting effect on stocks either. Actually, it was the comments they didn’t use that caught the attention of market watchers. They did not say they would increase their QE program if needed, which meant they felt they were out of the woods and that economic growth was returning quickly. This is a good thing.
Across the other pond, the big news of the week was that North Korea’s leader has agreed to meet with President Trump with regards to denuclearization, and this also aided the global stock rally.
THIS WEEK
It is another important week for economic data as we get the latest read on inflation with the CPI and PPI. That will be followed by the all-important retail sales figures, housing starts/permits, industrial production and consumer sentiment. My current thinking is that we would have to see some pretty bad numbers to derail this rally, so stay tuned and we’ll keep you posted.
Todd Day, Portfolio Manager
Horizon Financial Services, LLC
March 12, 2018
