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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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The Week In Review

3/29/18

 

Technology shares rebounded on Thursday, leading a broad rally on Wall Street, as investors kicked off the extended Easter weekend on a positive note.

The tech-heavy Nasdaq Composite jumped 1.6% to 7063.44, the S&P 500 climbed 1.4% to 2640.87, and the Dow Jones Industrial Average advanced 1.1% to 24103.11. The three major indices finished Thursday with weekly gains between 1.0% and 2.4%, but finished March with monthly losses between 2.7% and 3.7%.

Technology giants Microsoft (MSFT 91.27, +1.88), Facebook (FB 159.79, +6.76), and Alphabet (GOOG 1031.79, +27.23) added between 2.1% and 4.4% on Thursday, while other notable tech names like Intel (INTC 52.08, +2.48), Netflix (NFLX 295.35, +9.58), and NVIDIA (NVDA 231.59, +10.24) advanced between 3.4% and 5.0%. Apple (AAPL 167.78, +1.30) also finished in the green, adding 0.8%, but a late bout of selling pulled the company, and the broader market, from its session high.

Needless to say, the S&P's most influential sector -- information technology -- finished at the top of the sector standings, adding 2.2%. Thursday's positive performance for the tech sector was preceded by disappointing outings on Tuesday and Wednesday, during which the group declined by a total of 4.3%. The sector had a poor month, losing 4.0%, but still remains at the top of the 2018 sector standings with a year-to-date gain of 3.2%; for comparison, the S&P 500 is down 1.2% for the year.

As for the 10 remaining sectors, nine finished Thursday in positive territory, with energy (+2.2%) and materials (+1.9%) showing particular strength. The telecom services (unch) and real estate (-0.1%) sectors were the worst performers, but they didn't have much of an impact; the two groups represent just 5.0% of the broader market combined. The heavily-weighted financial group finished a step behind the benchmark index, adding 1.3%, as yields declined across the curve; the benchmark 10-yr yield dropped four basis points to 2.74%.

In the consumer discretionary sector (+1.4%), Amazon (AMZN 1447.34, +15.92) fell as much as 4.6% before rebounding to finish with a gain of 1.1%. The early weakness was attributed to a tweet from President Trump, in which he reiterated his concerns about the company, condemning it for paying "little to no taxes to state and local government" and using the U.S. Postal System as its "delivery boy." The tweet followed a Wednesday report from Axios that said Mr. Trump is looking for ways to regulate the internet giant.

Overseas, the major stock indices in Asia finished Thursday on a higher note, with Japan's Nikkei adding 0.6%, and the major bourses in Europe also advanced, adding between 0.2% and 1.3% apiece. Russia announced that it will expel 60 U.S. diplomats and order the closure of the U.S. Consulate in St. Petersburg in retaliation to similar measures taken by the U.S. and other countries following the poising of a former Russian double agent in England.

Markets in the U.S. and Europe will be closed tomorrow for Good Friday.

Reviewing Thursday's big batch of economic data, which included February Personal Income, Personal Spending, PCE Prices, and core PCE Prices, the weekly Initial Claims report, the Chicago PMI for March, and the final reading of the University of Michigan Consumer Sentiment Index for March:

  • Personal income climbed 0.4% in February (Briefing.com consensus +0.4%) following an unrevised increase of 0.4% in January. Meanwhile, personal spending rose 0.2% in February (Briefing.com consensus +0.2%) following an unrevised increase of 0.2% in January. The PCE Price Index increased 0.2% in February (Briefing.com consensus +0.2%), and the core PCE Price Index, which excludes food and energy, also increased 0.2% (Briefing.com consensus +0.2%). Year-over-year, the core PCE Price Index is up 1.6% after hovering at +1.5% in the last three readings.
    • The key takeaway from the report is that it won't influence Fed officials to significantly alter the course of monetary policy.
  • The latest weekly initial jobless claims count totaled 215,000, while the Briefing.com consensus expected a reading of 230,000. Today's tally was below the revised prior week count of 227,000 (from 229,000). As for continuing claims, they rose to 1.871 million from a revised count of 1.836 million (from 1.828 million).
    • The key takeaway from this report is that outside of some week-to-week volatility, initial and continuing claims remain at historically-low levels.
  • The Chicago PMI for March hit 57.4 (Briefing.com consensus 62.0), down from 61.9 in February.
    • The key takeaway from the report is that it echoed inflationary concerns that were expressed in the February report. Supplier delivery times reportedly increased and are considered to be 'long' by recent standards.
  • The final reading of the University of Michigan Consumer Sentiment Index for March dropped to 101.4 (Briefing.com consensus 102.0) from 102.0 in the preliminary reading.
    • The key takeaway from the report is that even after the pullback in the final reading for March, the Sentiment Index remains at its highest level since April 2004.

Investors will receive just two pieces of data on Monday -- the ISM Index for March (Briefing.com consensus 60.0) and the Construction Spending report for February (Briefing.com consensus +0.5%). Both reports will be released at 10:00 AM ET.

  • Nasdaq Composite: +2.3% YTD
  • S&P 500: -1.2% YTD
  • Dow Jones Industrial Average: -2.3% YTD
  • Russell 2000: -0.4% YTD

Week In Review: Rebound

Equities rebounded this week, ending a two-week skid; the Nasdaq Composite climbed 1.0%, the S&P 500 jumped 2.0%, and the Dow Jones Industrial Average rallied 2.4%. Trading was volatile at times, but smoothed out on Thursday as investors wrapped up the abbreviated week on a positive note. Markets will be closed on March 30 for Good Friday.

Investors kicked off the week with a rally on Monday, pushing the major indices up between 2.7% and 3.3% apiece, following a Wall Street Journal report that the U.S. and China have started negotiating to improve American access to Chinese markets. The news helped ease fears of a trade war, which were elevated after the White House announced tariffs on Chinese imports last week -- prompting Beijing to retaliate with tariffs of its own. Microsoft (MSFT) was particularly strong on Monday, spiking around 7.5%, after Morgan Stanley raised its target price from $110 to $130 -- a new Street high.

The market reversed course on Tuesday, however, with FAANG names -- Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG) -- leading the retreat. Market darling NVIDIA (NVDA) tumbled nearly 8.0% after announcing that it has temporarily suspended autonomous driving tests in order to learn more about last week's fatal collision involving a self-driving Uber car. Tesla (TSLA), which is a leader in autonomous driving technology, also dropped around 8.0%.

Stocks struggled for direction on Wednesday, but then rallied on Thursday ahead of the extended Easter weekend. However, unlike many of its FAANG peers, Amazon (AMZN) continued tumbling after an Axios report on Wednesday that President Trump would like to change Amazon's tax treatment, as he believes the company has gotten a free ride from taxpayers. The White House initially responded by saying there aren't any policy changes regarding Amazon at the moment, but the president reiterated his concerns about the company in a tweet on Thursday. AMZN shares lost 3.2% this week in total.

11 of 11 S&P 500 sectors finished the week with gains. Less-risky countercyclical groups like consumer staples (+3.5%), utilities (+3.0%), and telecom services (+3.1%) were the top performers, while the heavily-weighted financial sector (+2.7%) also showed relative strength. The top-weighted technology space lagged with a gain of 1.7%, while the consumer discretionary sector was among the worst performers, thanks largely to Amazon, adding 1.1%.

Investors received the Personal Income and Spending report for February on Thursday, and, for the second month in a row, it was in line with expectations. The PCE Price Index increased 1.8% year-over-year after being up 1.7% year-over-year in January, while the core PCE Price Index rose 1.6% year-over-year after three consecutive months of 1.5% year-over-year growth. The key takeaway from the report is that it won't influence Fed officials to significantly alter the course of monetary policy.

In the bond market, the yield curve flattened notably this week, with the 2s10s spread dropping seven basis points to 48 bps -- its lowest level since 2007. The yield on the benchmark 10-yr note declined seven basis points to 2.74%, while the 2-yr yield held steady at 2.26%. Most of the bond buying took place amid the equity sell off on Tuesday.

Headlines provided by Briefing.com