Year: 2018

Facebook (FB) derailed the Nasdaq early in the week and it spilled over into broader selling later in the week. The Russell 2000 Index was the strongest index, falling 4.79 percent. The Nasdaq trailed with a loss of 6.95 percent. Facebook declined 14.07 percent.

Oil prices climbed above $65 a barrel this week, up from $62 at the end of last week. A larger-than-expected inventory drawdown boosted prices, as did political events. Saudi Crown Prince Mohammed bin Salman met with President Trump on Tuesday and on Thursday. President Trump also named John Bolton as National Security Adviser. Trump and Bolton both have issues with the Iran nuclear deal, an agreement that allows increased Iranian oil exports.  SPDR Energy (XLE) fell 0.48 percent on the week.

The Federal Reserve raised interest rates a quarter-point as expected this week. The Fed’s policy statement forecast three hikes in 2018.

February existing home sales beat expectations this week, rising to an annualized pace of 5.54 million versus forecasts of 5.40 million. February new home sales slightly missed expectations of 622,000 at 618,000, but this was higher than year-ago levels and consistent with the current expansion.

February durable goods orders rose 3.1 percent versus forecasts of 1.8 percent. Initial claims for unemployment hit 229,000, still near four-decade lows. The flash manufacturing PMI for March was 55.7, up from last month’s 55.3. The services PMI slipped to 54.1 versus 55.9 last month. The final numbers will be released at the start of April.

President Trump announced $50 billion in tariffs on Chinese imports in conjunction with a Section 301 investigation on Thursday. Tariffs will become law in June if there’s no agreement with China. President Trump wants an immediate reduction in the trade deficit of $100 billion, which would likely come via increased Chinese imports. China’s initial response was mild with only $3 billion in retaliatory tariffs. Equities with significant exposure to the Chinese market such as Caterpillar (CAT) fell in response. Chinese stocks also fell, and reports indicate the Chinese government bought Mainland equities on Friday.

The U.S.-China bilateral trade deficit is on pace to exceed $400 billion in 2018, equivalent to 2 percent of the U.S. economy and 3.6 percent of Chinese GDP. If the trade deficit fell by $100 billion and neither country substituted the lost imports and exports, U.S. GDP growth would increase roughly 0.5 percent while China’s could slow by 0.8 percent.

The U.S. Dollar Index fell 0.85 percent this week. SPDR S&P 500 (SPY) underperformed iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) due to the weaker dollar and Facebook’s effect on technology shares.

Although the Federal Reserve hiked short-term interest rates this week, long-term rates declined. The 10-year Treasury yield fell as low as 2.80 percent on Thursday.

Earnings news was strong this week with FedEx (FDX) reporting $3.72 per share in earnings versus estimates of $3.08 and revenue of $16.5 billion. Tax cuts and improved efficiency have also lifted 2018 guidance. Nike (NKE) beat earnings and expects its North American sales slump to turn around in early 2019. Overseas growth drove earnings this year.

Micron Technology (MU) also beat earnings and raised guidance this week, but shares slumped with the broader market. General Mills (GIS) reported $0.71 per share in earnings this week, missing expectations by a nickel.

Equities closed lower on Monday following a Facebook privacy scandal. Shares declined as much as 8 percent on the day, closing with a loss of 6.7 percent. Facebook is 5.5 percent of PowerShares QQQ (QQQ) and 6.9 percent of SPDR Technology (XLK).

Economic data will include Wednesday’s Federal Open Market Committee meeting. Investors expect Federal Reserve officials will vote to raise interest rates 25 basis points. The odds of a rate hike are 95 percent in the futures market.

February new and existing home sales, the flash PMIs for March, weekly jobless claims, and durable goods orders will be out later in the week. Last week, housing starts and building permits missed expectations, but economists are more optimistic about this week’s reports. Existing home sales are forecast to match January’s annualized pace and new home sales are expected to jump from an annualized pace of 593,000 in January to 630,000 in February.

Defense stocks were among the strongest performers on Monday. iShares U.S. Aerospace & Defense (ITA) gained 0.27 percent.

Overseas, the Bank of England will meet this week. On Monday, the British pound jumped after a breakthrough in Brexit negotiations with the European Union. Chinese housing price growth slowed in February.

The euro was up slightly after a European Central Bank source said the bank was “comfortable” with the market expecting a rate hike in the first quarter of 2019. If other leaks are accurate, the ECB plans to taper quantitative easing from September to December before starting its rate hike cycle. Euro strength translated into U.S. Dollar Index weakness, but WisdomTree Bloomberg U.S. Dollar Bullish (USDU) was up 0.08 percent on the day as emerging-market currencies weakened.

Earnings season is largely over, but Oracle (ORCL) and FedEx (FDX) will report this week. Oracle is the second-largest holding in iShares North American Software (IGV). Analysts are optimistic about FedEx’s per-share profits. They project a 30 percent increase from the year-ago quarter. Other companies reporting this week will include General Mills (GIS), Nike (NKE), Accenture (ACN), Micron Technology (MU).

Equities pulled back slightly from last week’s strong rally. The Russell 2000 slipped 0.69 percent on the week to lead performance. The Russell 2000 has returned 3.58 percent over the past two weeks.

The NFIB small business confidence index rose to 107.6 in February. Homebuilder confidence has eased slightly but remains close to two-decade highs. Consumer confidence jumped in March according to the University of Michigan’s survey. Economists forecast a rise to 99.5, but the reading hit 102.

February housing starts and permits fell from year-ago levels in February as multi-family units declined. Industrial production was much stronger than expected in February, rising 1.1 percent. Initial claims for unemployment were 226,000 last week, slightly better than expected. The Job Openings and Labor Turnover Survey (JOLTS) showed 6.3 million job openings in January, up from 5.7 million a month earlier.

Long-term interest rates fell to a one-month low this week. The 10-year treasury yield declined to 2.85 percent, the 30-year to 3.08 percent. SPDR Utilities (XLU) gained 2.51 percent. The dip in rates also coincided with lower inflation expectations. Both the consumer price index (CPI) and core inflation rose 0.2 percent in February, in line with expectations. Retail sales missed expectations, rising 0.2 percent ex-autos instead of the forecast 0.4 percent.

The U.S. Dollar Index advanced this week. SPDR S&P 500 (SPY) fell 1.28 percent, while iShares MSCI EAFE (EFA) declined 0.44 percent and iShares MSCI Emerging Markets (EEM) fell 1.09 percent.

Falling gasoline inventory boosted crude prices this week and offset a large rise in crude oil inventory. Oil prices gained 1.73 percent today. Grain prices fell this week and PowerShares DB Agriculture (DBA) lost 0.83 percent. This dip contributed to falling inflation expectations.

The White House nixed Broadcom’s (AVGO) bid for Qualcomm (QCOM) this week, clearing the way for a possible Qualcomm bid from Intel (INTC). The White House also confirmed ambitions to reduce the trade deficit by $100 billion. Increased Chinese imports of U.S. manufactured goods and energy are the preferred method, but the Trump Administration is also preparing tariffs that could reach $60 billion if no deal is reached.

Ulta Beauty (ULTA) and Dollar General (DG) rallied after earnings reports this week, while Broadcom (AVGO) and Tiffany’s (TIF) slipped.