The Week On Wall Street
A late-week surge, triggered by reassuring Fed-speak, propelled stocks higher last week. The Dow Jones Industrial Average gained 1.75%, while the Standard & Poor’s 500 advanced 1.90%. The Nasdaq Composite index picked up 2.58% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.81%.
Stocks Resume Climb
After rebounding to start the week, stocks weakened following higher inflation numbers out of Europe and higher-than-expected manufacturing activity. Stocks continued their decline into early Thursday following a report of higher labor costs and low initial jobless claims. But stocks staged an afternoon relief rally on Thursday following comments by Atlanta Fed President Raphael Bostic that he was “still very firmly” supportive of increasing rates in quarter-point increments. The climb in stocks was remarkable, given that yields on 10-year Treasuries reached their highest level since November. Undeterred by a strong services data report, the upside momentum continued into the final trading day and added to the week’s gains.
Disconcerting Economic Data
It was a relatively quiet week for economic news, but several new economic data reports gave insights into overall activity. U.S. manufacturing activity contracted in February–the fourth consecutive month it has done so. While this may eventually justify a reason for moderating future rate hikes, the activity exceeded analysts’ expectations. An accompanying survey of manufacturers pointed to improving demand and potentially accelerating price pressures. Meanwhile, China reported an outsized jump in manufacturing activity, which may help relieve remaining supply chain kinks. But the report may also fuel commodity price increases and influence global inflation. Inflation remained a persistent issue in Europe, as February’s Eurozone inflation read was hotter than anticipated.
This Week: Key Economic Data
Monday: Factory Orders.
Wednesday: Automated Data Processing (ADP) Employment Report. Job Openings and Labor Turnover Survey (JOLTS).
Thursday: Jobless Claims.
Friday: Employment Situation.
This Week: Notable Companies Reporting Earnings
Tuesday: Dick’s Sporting Goods, Inc. (DKS), CrowdStrike (CRWD).
Wednesday: MongoDB, Inc. (MDB).
Thursday: Ulta Beauty, Inc. (ULTA), DocuSign (DOCU).
A little Fed talk this week with Jerome Powell testifying before Congress a couple of times. I’m sure their questions will be riveting. Nonetheless the big news comes next week in the form of February's inflation data with CPI and PPI. The downward trend should still be in place and the Fed says they’re data dependent which would imply a quarter percent rate hike on March 22.
The technicals in stocks are looking good at the moment and the market appears to be in an uptrend since October. I’m often asked about corporate earnings and how they will affect stock prices. Last quarter’s earnings were pretty good overall, but we did see some downward guidance into this year. After doing some research our friends at Fundstrat, an independent research firm and data scientists, tell us stocks typically bottom 11-12 months before earnings bottom. Remember, stocks are forward looking. They are definitely not looking to the past or present to determine their direction. The present matters only as to how it will affect future earnings. Thus, the proverbial statement that stocks climb a wall of worry.
I wouldn’t say we are completely out of the woods when it comes to market volatility, but there are positives we can point to.
Make it a great week!