Market Perspective For March 16, 2018

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.

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