Capital Market Implications for the Week of March 12 - 16, 2018
Last week’s economic releases were mixed, as consumer related reports for February came in below estimates while manufacturing data remained strong. February’s consumer related reports including retail sales, housing starts and building permits were all weaker than expected and suggested the consumer retrenched after last year’s post hurricane-season spending spree. The softness in February’s retail sales, which were off -0.1% from January levels, was the third consecutive monthly decline and one that prompted economists to lower their estimates for first quarter gross domestic product. Indeed, the Atlanta Fed reduced its GDPNow forecast to less than 2% annualized for the quarter. On the other hand, manufacturing remained strong, as industrial production increased 1.1% in February, and consumer sentiment in March reached a multi-year high of 102.0.
The stock market continued its nervous ways last week, as it reacted to each new piece of data. In the end, it was the disappointing retail sales number that sent the market into a tailspin. Thus, for the week, the S&P 500 Index dropped -1.2% while the Dow Jones Industrial Average sank -1.5%. The only positive sectors for the week were utilities and real estate, which rose 2.6% and 1.5%, respectively. With fears of trade wars mounting, the week’s worst performing sector was materials, which declined -3.2%. International markets did relatively well last week, as negative news was mostly domestic. The MSCI EAFE Index increased 0.2% while emerging markets gained 0.5%. Last week, in contrast to stocks, bond movements were limited. For the week overall, the Barclays U.S. Aggregate Bond Index and U.S. corporate bonds both gained 0.2%, ten-year municipal bonds rose 0.1% while high yield bonds were the only losers closing down -0.2%.
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