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Market Week: March 9, 2015

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Key Dates/Data Releases

3/10: JOLTS job turnover report

3/12: Retail sales, business inventories

3/13: Wholesale inflation

The Markets

Good news about unemployment proved bad news for the equities markets. The Dow industrials closed 279 points lower after Friday’s strong jobs report as investors feared it might help hasten the end of the Fed’s near-zero target interest rate. Nevertheless, the Nasdaq topped 5,000 earlier in the week for the first time since March 2000. The strengthening of the U.S. dollar in the wake of Thursday’s European Central Bank meeting took a toll not only on the euro but on gold and oil; gold fell to $1,164–its lowest price of the year–while oil dipped below $50 a barrel. Meanwhile, the benchmark 10-year Treasury yield shot to its highest level of the year as prices fell.

Market/Index 2014 Close Prior Week As of 3/6 Weekly Change YTD Change
DJIA 17823.07 18132.70 17856.78 -1.52% .19%
Nasdaq 4736.05 4963.53 4927.37 -.73% 4.04%
S&P 500 2058.90 2104.50 2071.26 -1.58% .60%
Russell 2000 1204.70 1233.37 1217.52 -1.29% 1.06%
Global Dow 2501.66 2581.89 2530.74 -1.98% 1.16%
Fed. Funds .25% .25% .25% 0% 0%
10-year Treasuries 2.17% 2.03% 2.24% 21 bps 7 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

  • The U.S. economy added 295,000 jobs in February, which helped cut the unemployment rate from 5.7% to 5.5%. The Department of Labor said February’s job growth exceeded the 266,000 monthly average for the last year. Hourly wages were up 2% from a year earlier.
  • The European Central Bank raised its forecast for economic growth this year from 1% to 1.5%, and from 1.5% in 2016 to 1.9%. Following the ECB meeting, the euro fell to $1.08 against the U.S. dollar, its lowest level since fall 2003. The ECB begins monthly purchases of €60 billion of bonds this week.
  • China cut its growth forecast for 2015 to 7%; Premier Li Keqiang cited underutilization of manufacturing capacity, slowing investment growth, potential deflation, and the need for increased public spending on social services. Though most developed economies would be thrilled with 7% growth, it’s lower than 2014’s 7.4% increase.
  • The U.S. economy seemed to survive the winter-weather onslaught reasonably well, as the Federal Reserve’s anecdotal “beige book” report showed economic expansion in most of the Fed’s 12 districts between early January and mid-February. Consumer spending was said to have improved since the previous report, while manufacturing increases were spottier.
  • In the fifth round of stress tests for the nation’s largest banks, the Federal Reserve said all 31 banks tested demonstrated that they had the ability to survive a series of simultaneous financial pressures, such as a sudden sharp increase in unemployment, a housing market collapse, and a crash on Wall Street.
  • Apple will replace telecommunications company AT&T as one of the 30 stocks in the Dow Jones Industrial Average. According to S&P Dow Jones Indices, the March 18 change in the price-weighted index was made to help offset a four-for-one split in Visa, another Dow stock, which otherwise would have substantially affected the index’s weighting of the information technology sector.
  • Americans’ personal income was up 0.4% in February, according to the Bureau of Economic Analysis; even on an inflation-adjusted basis, income was up 0.9%. Meanwhile, lower gas prices helped cut consumer expenditures by 0.2% during the month.
  • Growth in the U.S. services sector continued to accelerate, according to the Institute for Supply Management’s February survey. The 56.9% reading was 0.2% higher than in January and represented the 61st straight month of growth. However, the ISM’s corresponding survey of manufacturers showed a 0.6% decline from January’s 53.5%.
  • Construction spending rose 1.1% in January and was 1.8% higher than a year earlier. Private construction was up 0.5%, with commercial construction responsible for the largest share of the increase.

Eye on the Week Ahead

Investors will watch to see if last week’s jitters about a midyear rate increase continue as the March 17-18 Federal Open Market Committee meeting gets closer. The Job Openings and Labor Turnover Survey (JOLTS) could reinforce Friday’s strong unemployment data.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

 


  
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