April 2017
THE MONTH IN BRIEF
Stocks went sideways rather than north in March, with the S&P 500 losing just 0.04%. The Federal Reserve made another quarter-point interest rate move, and overseas, the United Kingdom initiated Brexit proceedings. While new data showed weak consumer spending, consumer optimism remained high and hiring was once again strong. A subpar month for commodities did bring major gains for two energy futures. In the housing market, existing home sales decelerated, while new home sales picked up. A little volatility did not upset the primarily bullish outlook on Wall Street.1
Stocks went sideways rather than north in March, with the S&P 500 losing just 0.04%. The Federal Reserve made another quarter-point interest rate move, and overseas, the United Kingdom initiated Brexit proceedings. While new data showed weak consumer spending, consumer optimism remained high and hiring was once again strong. A subpar month for commodities did bring major gains for two energy futures. In the housing market, existing home sales decelerated, while new home sales picked up. A little volatility did not upset the primarily bullish outlook on Wall Street.1
DOMESTIC ECONOMIC HEALTH
On March 15, the Federal Reserve felt confident enough in the economy to raise the benchmark interest rate to the 0.75%-1.00% range. The central bank left its 2017 dot-plot unchanged – its forecast still calls for a total of three rate hikes this year.2
On March 15, the Federal Reserve felt confident enough in the economy to raise the benchmark interest rate to the 0.75%-1.00% range. The central bank left its 2017 dot-plot unchanged – its forecast still calls for a total of three rate hikes this year.2
Last month, most of the major indicators affirmed the health
of the economy. The only question mark concerned household spending, and the
0.1% February gain may have just been an aberration. Consumer incomes did
increase 0.4% in February, so it appeared households were pocketing more of what
they had made; in fact, there was only a 0.1% February rise in retail sales.
Speaking of consumer spending, the Bureau of Economic Analysis revised
fourth-quarter growth up to 2.1% as the month ended; even with that upgrade to
the Q4 GDP number, the economy grew just 1.6% last year, a full percentage
point less than in 2015.3,4
Americans felt very confident about the state of the economy
in March. The Conference Board’s index jumped up 9.5 points in a month to a
remarkably high reading of 125.6. The University of Michigan’s monthly index of
consumer sentiment finished March at 96.9, up 0.6 points from its final
February mark.5,6
The labor market showed further strength. Department of Labor
data showed the economy adding 235,000 net new jobs in February, with
the
construction and education/health care sectors accounting for 120,000 of them.
This sent the U-3 unemployment rate down 0.1% further to 4.7%, while the U-6
rate measuring “total” unemployment declined another 0.2% to 9.2%.7
In the opening week of March, the latest Institute for Supply
Management gauges of manufacturing and service sector activity showed both
sectors in good shape during February. At 57.6, the ISM services PMI reached
its highest point since October 2015; the U.S. service sector saw its
eighty-sixth straight month of expansion. The ISM factory PMI rose 1.7 points
in February to 57.7.8
The Federal Reserve’s preferred inflation gauge, the PCE price
index, showed a 2.1% annualized gain for the year ending in February. That was
a 5-year peak. Surpassing that, the headline Consumer Price Index rose 2.7% in
the 12 months concluding in February, even with a mere 0.1% monthly advance.
Producer prices were up 2.2% year-over-year with a February increase of 0.3%.3,5
GLOBAL ECONOMIC HEALTH
Just before March ended, United Kingdom Prime Minister Theresa May invoked Article 50 of the Lisbon Treaty, formally triggering the start of the Brexit process. The clock is now ticking: within two years, the U.K. will make either a “hard” or “soft” exit from the European Union, with the first round of negotiations getting underway at an E.U. summit commencing April 29. The big question is whether the U.K. will be able to stay in the E.U.’s single market after the Brexit; it has said it might forfeit such trade access in exchange for curbing immigration from other E.U. member nations. Should it retain that trade access, U.K. citizens will still be allowed to work and live in other E.U. countries without getting visas. If negotiations somehow do not result in an exit deal by April 2019, then the terms of the Brexit could be left to the courts and/or the rules of the World Trade Organization.9
Just before March ended, United Kingdom Prime Minister Theresa May invoked Article 50 of the Lisbon Treaty, formally triggering the start of the Brexit process. The clock is now ticking: within two years, the U.K. will make either a “hard” or “soft” exit from the European Union, with the first round of negotiations getting underway at an E.U. summit commencing April 29. The big question is whether the U.K. will be able to stay in the E.U.’s single market after the Brexit; it has said it might forfeit such trade access in exchange for curbing immigration from other E.U. member nations. Should it retain that trade access, U.K. citizens will still be allowed to work and live in other E.U. countries without getting visas. If negotiations somehow do not result in an exit deal by April 2019, then the terms of the Brexit could be left to the courts and/or the rules of the World Trade Organization.9
By
World Bank projections, five Asian economies will expand by 6.5% or more this
year: Laos (7.0%); Cambodia, Myanmar, and the Philippines (6.9%); and China
(6.5%). China’s growth is at a 26-year low in 2017, but foreign investment in
the Chinese economy is forecast to rise to 15.0% this year, compared to only
4.1% in 2016. The March impeachment of South Korean President Park Geun-hye
delivered another black eye to the fourth largest economy in Asia; Park and
several Samsung officials were disgraced with corruption charges this winter,
an especially troubling development given that the Samsung conglomerate
accounts for about 15% of the South Korean economy. South Korea has already
seen the collapse of Hanjin Shipping, one of the world’s major cargo lines, and
its government also recently bailed out its major shipbuilders.10,11
WORLD MARKETS
March saw many foreign benchmarks advance. At the forefront was Spain’s IBEX 35. It rose 9.50% for the month. Several other indices added 3% or more in March: Argentina’s MERVAL, 5.92%; France’s CAC 40, 5.43%; Germany’s DAX, 4.04%; Mexico’s Bolsa, 3.60%; Korea’s KOSPI, 3.28%; India’s Sensex, 3.05%; the FTSE Eurofirst 300, 3.03%. Other March gains: Australia’s All Ordinaries, 2.48%; MSCI Emerging Markets, 2.35%; Hong Kong’s Hang Seng, 1.56%; Canada’s TSX Composite, 0.96%; the United Kingdom’s FTSE 100, 0.82%; MSCI World, 0.82%.12,13
March saw many foreign benchmarks advance. At the forefront was Spain’s IBEX 35. It rose 9.50% for the month. Several other indices added 3% or more in March: Argentina’s MERVAL, 5.92%; France’s CAC 40, 5.43%; Germany’s DAX, 4.04%; Mexico’s Bolsa, 3.60%; Korea’s KOSPI, 3.28%; India’s Sensex, 3.05%; the FTSE Eurofirst 300, 3.03%. Other March gains: Australia’s All Ordinaries, 2.48%; MSCI Emerging Markets, 2.35%; Hong Kong’s Hang Seng, 1.56%; Canada’s TSX Composite, 0.96%; the United Kingdom’s FTSE 100, 0.82%; MSCI World, 0.82%.12,13
There were also three notable retreats.
China’s Shanghai Composite declined 0.59%; Japan’s Nikkei 225 lost 1.10%; and
Russia’s MICEX fell 1.96%.12
COMMODITIES MARKETS
The price of both natural gas and unleaded
gasoline climbed in March: the first of those two commodities gained 15.28%,
the second 12.17%. Cocoa futures added 3.87% last month; wheat futures, 0.29%.
In sum, that was the good news.14
Unfortunately, many commodities turned south in March. Oil made a 5.83% descent on the NYMEX, settling at $50.85 as the month ended. Copper fell 2.07%; heating oil, 3.17%; platinum, 7.39%; soybeans, 7.75%; and sugar, 12.95%. Losses of less than 1% were incurred by silver (0.14%), cotton (0.21%), corn (0.48%), and coffee (0.64%). Gold closed March at $1,247.40; silver at $18.28. The U.S. Dollar Index fell 0.79% to 100.56, slipping to -1.61% YTD.1,14
REAL ESTATE
Reports from the National Association of Realtors brought good news and bad news. February had seen a 3.7% dip in existing home sales; on the other hand, there was a 5.5% gain for pending home sales. A Census Bureau report showed new home buying improving 6.1% in February; this was on the heels of a 5.3% gain in January.5
Reports from the National Association of Realtors brought good news and bad news. February had seen a 3.7% dip in existing home sales; on the other hand, there was a 5.5% gain for pending home sales. A Census Bureau report showed new home buying improving 6.1% in February; this was on the heels of a 5.3% gain in January.5
The latest (January) edition of the 20-city
S&P/Case-Shiller home price index displayed a 0.2% monthly gain, which left
its 12-month advance at 5.7%. Housing starts rose 3.0% in February after a 1.9%
dip in January, while permits for future construction fell 6.2% after a 4.6%
January boost.5
Home loan rates did creep a bit higher across March. In
Freddie Mac’s March 30 Primary Mortgage Market Survey, the 30-year fixed had an
average interest rate of 4.14%, up from 4.10% on March 2. In the same period,
the average interest rate on the 15-year FRM moved from 3.32% to 3.39%, while
the average rate on the 5/1-year ARM increased from 3.14% to 3.18%.15
LOOKING
BACK…LOOKING FORWARD
The Nasdaq Composite was the only one of the three major indices to post a March gain, adding a healthy 1.48%. Both the S&P 500 and Russell 2000 took tiny losses, respectively declining 0.04% and 0.05%. The Dow Jones Industrial Average fell 0.72%. The CBOE VIX pulled back 4.26%. When Wall Street closed on March 31, these indices settled as follows: S&P, 2,362.72; DJIA, 20,663.22; NASDAQ, 5,911.74; RUT, 1,385.92; VIX, 12.37. Looking further at market statistics, one notices a 28.30% 52-week gain for the Russell 2000 through the end of March. The best performer last month was the PHLX Semiconductor Sector index, which rose 4.33% to take its 52-week advance to 52.04%.1
The Nasdaq Composite was the only one of the three major indices to post a March gain, adding a healthy 1.48%. Both the S&P 500 and Russell 2000 took tiny losses, respectively declining 0.04% and 0.05%. The Dow Jones Industrial Average fell 0.72%. The CBOE VIX pulled back 4.26%. When Wall Street closed on March 31, these indices settled as follows: S&P, 2,362.72; DJIA, 20,663.22; NASDAQ, 5,911.74; RUT, 1,385.92; VIX, 12.37. Looking further at market statistics, one notices a 28.30% 52-week gain for the Russell 2000 through the end of March. The best performer last month was the PHLX Semiconductor Sector index, which rose 4.33% to take its 52-week advance to 52.04%.1
March ended quietly, with the bulls taking a
breather. Will investors find hopes or fundamentals to rally around in April?
The next earnings season is two weeks ahead, and FactSet forecasts annualized
earnings growth of 9.1% for S&P 500 firms – a bullish projection, indeed,
that would represent the best year-over-year improvement since Q4 2011. Any
nascent plans for tax reform could also stoke bullish sentiment, even though
reforms could take many months to enact. While the rally waned at the end of
March, it could find some fresh legs as the second quarter begins, with the
markets experiencing relatively placid weather so far in 2017.19
UPCOMING
ECONOMIC RELEASES: What major news items will Wall
Street watch for in April? The March Challenger job-cut report (4/6), the
Department of Labor’s March employment report (4/7), the March PPI and the
preliminary April consumer sentiment index from the University of Michigan (4/13),
March retail sales and the March CPI (4/14), March industrial production,
housing starts and building permits (4/18), a new Federal Reserve Beige Book
(4/19), the Conference Board’s latest leading indicators report (4/20), March
existing home sales (4/21), the April Conference Board consumer confidence
index and March new home sales (4/25), March hard goods orders and pending home
sales (4/27), and then, the federal government’s initial estimate of
first-quarter growth and the final April consumer sentiment index from the
University of Michigan (4/28). The March consumer spending report and PCE price
index will both be released on May 1.
Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC
Bogetto Financial is not affiliated with First Heartland Capital, Inc.
Bogetto & Associates does not provide legal or tax advice. These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.
This material was prepared by MarketingPro,
Inc., and does not necessarily represent the views of the presenting party, nor
their affiliates. The information herein has been derived from sources believed
to be accurate. Please note - investing involves risk, and past performance is
no guarantee of future results. Investments will fluctuate and when redeemed
may be worth more or less than when originally invested. This information
should not be construed as investment, tax or legal advice and may not be
relied on for the purpose of avoiding any Federal tax penalty. This is neither
a solicitation nor recommendation to purchase or sell any investment or
insurance product or service, and should not be relied upon as such. All market
indices discussed are unmanaged and are not illustrative of any particular
investment. Indices do not incur management fees, costs and expenses, and
cannot be invested into directly. All economic and performance data is
historical and not indicative of future results. The Dow Jones Industrial Average
is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ
Composite Index is a market-weighted index of all over-the-counter common
stocks traded on the National Association of Securities Dealers Automated
Quotation System. The Standard & Poor's 500 (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 Russell 2000 Index measures the performance of the
small-cap segment of the U.S. equity universe. The CBOE Volatility Index®
(VIX®) is a key measure of market expectations of near-term volatility conveyed
by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates
two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE
Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific
Exchange). NYSE Group is a leading provider of securities listing, trading and
market data products and services. The New York Mercantile Exchange, Inc.
(NYMEX) is the world's largest physical commodity futures exchange and the
preeminent trading forum for energy and precious metals, with trading conducted
through two divisions – the NYMEX Division, home to the energy, platinum, and
palladium markets, and the COMEX Division, on which all other metals trade. The
IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's
principal stock exchange. The MERVAL Index (MERcado de VALores, literally Stock
Exchange) is the most important index of the Buenos Aires Stock Exchange. The
CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40
companies listed on the Paris Bourse. The DAX 30 is a Blue Chip stock market
index consisting of the 30 major German companies trading on the Frankfurt
Stock Exchange. The Mexican Stock Exchange, commonly known as Mexican Bolsa,
Mexbol, or BMV, is the only stock exchange in Mexico. The Korea Composite Stock
Price Index or KOSPI is the major stock market index of South Korea,
representing all common stocks traded on the Korea Exchange. The BSE SENSEX
(Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK
EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted
stock market index of 30 well-established and financially sound companies
listed on the Bombay Stock Exchange (BSE). The FTSE Eurofirst 300 measures the
performance of Europe's largest 300 companies by market capitalization and
covers 70% of Europe's market cap. The All Ordinaries (XAO) is considered a
total market barometer for the Australian stock market and contains the 500
largest ASX-listed companies by way of market capitalization. The MSCI Emerging
Markets Index is a float-adjusted market capitalization index consisting of
indices in more than 25 emerging economies. The Hang Seng Index is a free
float-adjusted market capitalization-weighted stock market index that is the
main indicator of the overall market performance in Hong Kong. The S&P/TSX
Composite Index is an index of the stock (equity) prices of the largest
companies on the Toronto Stock Exchange (TSX) as measured by market
capitalization. The FTSE 100 Index is a share index of the 100 companies listed
on the London Stock Exchange with the highest market capitalization. The MSCI
World Index is a free-float weighted equity index that includes developed world
markets, and does not include emerging markets.
The SSE Composite Index is an index of all stocks (A shares and B
shares) that are traded at the Shanghai Stock Exchange. Nikkei 225 (Ticker:
^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index
of Asian stocks. The MICEX 10 Index (Russian: Индекс ММВБ10) is an unweighted
price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS
in Moscow. The US Dollar Index measures the performance of the U.S. dollar
against a basket of six currencies. PHLX Semiconductor Sector (SOX) is a
Philadelphia Stock Exchange capitalization-weighted index composed of companies
primarily involved in the design, distribution, manufacture, and sale of
semiconductors. Additional risks are associated with
international investing, such as currency fluctuations, political and economic
instability and differences in accounting standards. This material represents
an assessment of the market environment at a specific point in time and is not
intended to be a forecast of future events, or a guarantee of future results.
MarketingPro, Inc. is not affiliated with any person or firm that may be
providing this information to you. The publisher is not engaged in rendering
legal, accounting or other professional services. If assistance is needed, the
reader is advised to engage the services of a competent professional.
Citations.
1 - barchart.com/stocks/indices#/viewName=performance
[3/31/17]
2 -
marketwatch.com/story/fed-raises-interest-rates-by-a-quarter-point-sees-two-move-moves-this-year-2017-03-15
[3/15/17]
3 -
schaeffersresearch.com/content/ezines/2017/03/31/dow-jones-industrial-average-futures-slip-but-stocks-set-for-strong-quarter
[3/31/17]
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[3/31/17]
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[3/31/17]
6 - sca.isr.umich.edu/
[3/31/17]
7 - equities.com/news/a-strong-jobs-report-and-a-growing-divergence-between-jobs-and-employment
[3/10/17]
8 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm
[3/3/17]
9 - usatoday.com/story/news/world/2017/03/29/britain-invokes-article-50-4-things-know-brexit/99769996/
[3/29/17]
10 - forbes.com/sites/ralphjennings/2017/03/23/east-asias-5-fastest-growing-countries-in-2017/
[3/23/17]
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[3/10/17]
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markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [3/31/17]
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[3/31/17]
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money.cnn.com/data/commodities/ [3/31/17]
15 - freddiemac.com/pmms/archive.html?year=2017 [4/2/17]
16 -
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F31%2F16&x=0&y=0
[3/31/17]
16 -
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F31%2F16&x=0&y=0
[3/31/17]
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bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F31%2F16&x=0&y=0
[3/31/17]
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bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F30%2F12&x=0&y=0
[3/31/17]
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bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F30%2F12&x=0&y=0
[3/31/17]
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bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F30%2F12&x=0&y=0
[3/31/17]
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bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F30%2F07&x=0&y=0
[3/31/17]
16 -
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F30%2F07&x=0&y=0
[3/31/17]
16 -
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F30%2F07&x=0&y=0
[3/31/17]
17 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield
[3/31/17]
18 -
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll
[3/31/17]
19 - kiplinger.com/article/investing/T052-C008-S001-market-outlook-for-q2.html
[3/31/17]Financial Health...For Now & Tomorrow
Contact us Today
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
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