Market Commentary - Week ending March 2, 2018 

U.S. stocks were down sharply last week, closing out the month of February to the downside and
marking the first monthly loss for the U.S. stock market since October 2016. Volatility remained high and Our Short Term Indicator turned towards Nuetral.

• U.S. stocks were down sharply last week, the technology-heavy Nasdaq Composite retreated 80 points closing at 7,257, a loss of -1.1%. By market cap, smaller caps outperformed large caps with the mid cap S&P 400 off -1.4% and the small cap Russell 2000 down -1.0%, while the large cap S&P 500 gave up -2.0%.

• On the international front major markets across the altlanctic were deep in the red. The United Kingdom’s FTSE fell -2.4%, while on Europe’s mainland,France’s CAC 40 dropped -3.4%, and Germany’s DAX plunged -4.6%. Italy’s Milan FTSE plunged -3.4%. In Asia,China’s Shanghai Composite gave up just -1.1%, compared to Japan’s Nikkei which fell -3.3%. Hong Kong’s HangSeng finished the week down -2.2%. As grouped by Morgan Stanley Capital International, developed markets fell -2.7%, while emerging markets fell -3.2%.

• Commodities: While not giving a positive return, precious metals did provide some protection from the global sell-off this week. Gold fell half a percent to close at $1323.40 an ounce, while Silver was off just -0.1% ending the week at $16.47 an ounce. In energy, oil also dropped -$2.30 to $61.25 per barrel of West Texas Intermediate crude oil. Copper, seen as a proxy indicator of global economic health due to its variety of uses, sold off for a second week, down -2.7%.

• New Fed Chair Jerome Powell testified in front of the House Financial Services Committee this week and painted an optimistic picture of the U.S. economy, signaling that he will continue to support the viewpoint of ongoing robust economic growth. Powell said that the jobs market and business investment continue to strengthen, and that the headwinds that inhibited economic growth before have now become tailwinds. Powell emphasized that he plans to continue the policies of his predecessor who embarked on a gradual interest rate hike campaign while still encouraging broad economic growth. The Fed “will continue to strike a balance between avoiding an
  overheated economy” and allowing inflation to tick up toward the Federal Reserve’s 2 percent target, Powell said.

• Initial claims for new unemployment benefits fell to their lowest level since the late-60’s last week, according to the Labor Department. Initial claims fell by 10,000 to 210,000, lower than economists estimates of 226,000. Companies continue to be reluctant to lay off workers due to difficulty finding skilled replacements. Overall, the unemployment rate stands at a 17-year low of 4.1% and nationwide data shows companies have millions of jobs open – and difficulty filling them.

• Sales of newly constructed homes collapsed in January, running at a seasonally adjusted annual rate of just 593,000, a whopping 7.8% lower than December’s reading. Economists had expected sales at a 648,000 annual rate. At the current rate of sales, there is a 6.1 month supply of new homes available on the market—a sign of a well-stocked housing market. Realtors now expect the recent tax-law changes affecting the deductibility of property taxes and mortgage interest to negatively affect home sales in 2018.

• Homes prices continued to rise across the nation according to the latest reading of the S&P/Case-Shiller National Home Price Index. The index for December 2017 showed that home prices rose 0.7% in the final quarter of last year and 6.3% for the whole year. The more narrowly focused 20-city index also rose 6.3% for the year.

• Personal consumption expenditures(PCE) in the US increased 0.2 percent month-over-month in January of 2018, following a 0.4 percent rise in December, matching market expectations. It is the lowest gain in household consumption in five months as spending on durables contracted and consumption of services eased. The PCE index is the Federal Reserve’s preferred gauge of inflation and the index is thought to dictate how many times the Fed may raise interest rates in 2018. The annual increase in the PCE remained at 1.7% for its third consecutive month, while the 12-month increase in “core” inflation was at 1.5% for the fourth straight month. For more information on this click here  
• Sentiment among the nation’s consumers was the second highest in 14-years, according to the University of Michigan’s consumer sentiment index. The reading of 99.7 came on the heels of consumers’ more favorable assessments of jobs, wages, and higher after-tax pay, the University said. Of note, the highest proportion of households since 1998 reported that their finances had improved compared with a year ago.