Market Perspective for April 8, 2016

The stock market consolidated recent gains with small losses on the week. Declines were driven primarily by global trends, such as a sharp rally in the yen, often used by traders to fund asset purchases.

During a panel discussion Thursday evening, current Fed Chair Janet Yellen touted the strength of the U.S. labor market and said that the Fed was still on track to raise interest rates twice in 2016. These comments were followed by news of a special Fed meeting scheduled for Monday, to discuss the discount rate. The last time such a meeting was held was November 2015, when the Fed raised the discount rate ahead of December’s hike in the Fed funds rate. Financials and utilities rallied Friday, nonetheless.

The latest Labor Market Conditions Index indicated a 2.4-percent drop from the previous report. The Jobs Opening and Labor Turnover Survey (JOLTS) remained in-line with last month’s report and reflected continued strength in employment. The March ISM Non-Manufacturing Index released a reading of 54.5, up from the previous month’s 53.4 and above the consensus estimate of 54.0, indicating a stronger service sector. On Thursday, the latest weekly unemployment claims report showed the number of Americans filing for first time benefits was down slightly from last week, as expected.

Walgreens (WBA) reported a second-quarter sales increase, though growth fell short of expectations at $0.85 per share versus estimates of $1.28. The company was hit by a stronger dollar and a weaker-than-expected cold and flu season. Bed Bath and Beyond (BBBY) shares rallied on its fourth-quarter results, exceeding analysts’ projected EPS of $1.81 and top-line revenues estimate of $3.38 billion with actual EPS of $1.91 on revenues of $3.42 billion. On Thursday, Rite Aid (RAD) reported EPS of $0.07, beating consensus estimates by a penny per share on revenues that were slightly below expectations. CarMax (KMX) also beat consensus estimates with earnings of $0.74 per share on revenues of $3.71 billion.

Positive data and current global accommodative monetary policies remain favorable for the markets. Consolidation is proceeding as expected and the big banks will shift the focus to earnings next week.

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