Market Perspective for February 19, 2016

The recent rally was sustained through the holiday shortened week, providing for the market’s best trading periods since August. Global stocks also edged higher, as emerging markets were lifted by signs of stabilization in oil prices around $30 per barrel. West Texas Intermediate (WTI) gained almost 18 percent per barrel at its peak on continued reports of OPEC and Russian production freezes as well as a reduction in U.S. inventory levels.

Overall economic news, however, remained positive. The market was bolstered by an unexpected decline in the number of Americans filing for first time unemployment benefits. Producer prices edged up unexpectedly and U.S. industrial output rose 0.9 percent in January. Mortgage refinance applications rose more than 8 percent to the highest level in over a year. Capacity utilization also ticked higher, to 77.1 percent in January, ahead of estimates. The Empire State Manufacturing Index climbed back to -16.6 from January’s plunge to -19.4 as manufacturers struggled with dollar strength and sluggish global demand.

In earnings news, the share price for the online hotel and travel company Priceline (PCLN) advanced more than 11 percent after reporting positive forward guidance, better-than-expected earnings per share and revenue growth for the fourth quarter of 2015. Adding a record number of customers, T-Mobile U.S. (TMUS) tripled its net income and easily beat expectations. On the downside, Duke Energy (DUK) and Wal-Mart (WMT) missed consensus estimates. Duke Energy was hurt by volatility in its Central and South American business units. Wal-Mart’s net profits fell 8 percent, but the real hit to the stock came when the company lowered its sales forecast for next year. A dividend hike by fellow Dow component Coca-Cola (KO) helped offset Wal-Mart’s slide.

Overseas, European Central Bank (ECB) President Mario Draghi indicated the ECB may soon engage in another round of monetary easing, perhaps at the upcoming March meeting. In the United States, President of the St. Louis Federal Reserve James Bullard said that it would be unwise for the Fed to raise interest rates in light of declining inflation expectations and current market volatility. On Thursday, San Francisco Fed President John Williams said “underlying U.S. growth is strong” despite global volatility, comments that supported this week’s rally.

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