Market Perspective for February 26, 2018

The Dow Jones Industrial Average led equities higher on Monday. Blue-chip Dow components Cisco (CSCO), Intel (INTC), 3M (MMM), American Express (AXP) and Travelers (TRV) saw impressive gains, and Apple (AAPL) also rallied after rumors of three new phones in 2018 emerged.

Federal Reserve Chairman Jerome Powell will testify before Congress on Tuesday and Thursday. Speculators put the odds of a March rate hike at 87 percent and informal polling shows investor expectations are above 90 percent.

Home sales slowed in January to an annualized pace of 593,000. This is off the peak pace of 696,000 in November and down about 1 percent from January 2017, but still well within the uptrend in place since the home construction industry bottomed out in early 2011. The dip is in line with last week’s existing home sales data. Pending sales for January will be released on Wednesday.

The Case-Schiller home price index for December, January durable goods, core capital equipment orders, and February consumer confidence readings will be out on Tuesday. Manufacturing and service PMIs for February will be out on Thursday. The University of Michigan’s consumer sentiment survey is due on Friday.

Economists forecast revised fourth-quarter GDP growth will be lowered 0.1 percent to 2.5 percent, with jobless claims staying near 45-year lows. Construction spending, personal income and consumer spending for January are all expected to slow from December’s pace.  February auto sales are forecast to rise from January.

Bond yields retreated on Monday with the 10-year yield falling back to 2.85 percent. Bonds rallied across the board, with government, investment-grade, corporate, high-yield and floating-rate funds all advancing. Equity investors ignored the dip. SPDR Financials (XLF) rallied more than 1 percent on the day, while SPDR Utilities (XLU) suffered a small loss.

The S&P 500 Index has grown earnings 14.8 percent in the fourth quarter with 90 percent of companies reporting. Priceline (PCLN), Vale SA (VALE), EOG Resources (EOG), Express Scripts (ESRX),  (CRM), Lowe’s (LOW), Analog Devices (ADI), Anheuser-Busch (BUD), Best Buy (BBY), Vmware (VMW), J.C. Penney (JCP) and Footlocker (FL) will all report earnings this week.

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