Stock markets rallied this week as the Federal Reserve didn’t raise the short term interest rate and downgraded their estimate of the number of increases this year from 4 to 2. U.S. Stocks outperformed international stocks. Treasuries rose as yields declined. Commodities including oil rose as the dollar declined against most major currencies. Oil was especially strong as investors speculated that a meeting next month of OPEC and some non-OPEC countries to discuss capping production would alleviate the worldwide glut. Frankly, I believe the rise in oil prices is overdone as inventory levels continue to rise. If an agreement is reached it will likely be less than expected and unlikely to help much this year. Looking forward to next month we will start getting Q1 earnings. Factset is predicting that Q1 S&P 500 earnings will decline by 8.4% based on earnings guidance. When earnings are announced the decline will likely be less but unlikely to be positive. If earnings decline this will be the fourth consecutive quarter of earnings declines.
- The Commerce Department reported
- Retail sales fell 0.1% in February, in line with expectations. Excluding gasoline, retail sales rose 0.2% in February. January retail sales were revised from an increase of 0.2% to a decline of 0.4%.
- Housing starts rose 5.2% in the month of February. Single family housing starts increased 7.2% while multifamily housing starts increased only 0.8%. Permit applications that foretell future housing starts fell 3.1%.
- The Labor Department reported
- Producer prices fell 0.2% in February. Excluding the volatile food and energy sectors producer prices were unchanged. From a year earlier producer prices were unchanged.
- Consumer prices also fell 0.2% in February and are up 1.0% over the past year. Excluding volatile food and energy consumer prices rose 0.3% in February for a year over year increase of 2.3%.
- Unemployment claims in the previous week increased by 7,000 to a seasonally adjusted 265,000, better than expectations. The four week moving average of claims rose 750 to 268.000.
- The Federal Reserve reported that industrial production fell a seasonally adjusted 0.5% in February after rising 0.8% in January. From a year earlier industrial production was down 1.0%. The February weakness was due to mining (including oil and gas) and utilities. These sectors were hurt due to unseasonably warm weather and weak energy prices. The manufacturing component rose 0.2% in February after a 0.5% increase in January.
- The Energy Information Administration reported that oil inventories in the U.S. rose 1.3MM barrels in the prior week. Gasoline supplies fell 700,000 barrels and distillates fell 1.1MM barrels.
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Loren C. Rex, CFP®, AIF® Erik Smith
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