Market Perspective for March 26, 2018

Equities advanced on Monday as investors took advantage of discounted stocks. The S&P 500 gained 2.72 percent, while the Dow Jones Industrial average advanced 2.84 percent.  The Russell 2000 gained 3.26 percent.  Technology led Monday’s rally, despite last week’s significant drop and continued volatility in Facebook (FB). SPDR Technology (XLK) gained 3.81 percent and SPDR Financials (XLF) increased 3.24 percent.

This will be a shortened trading week. U.S. markets will close for Good Friday, and markets in Europe, Hong Kong and Australia will be closed on Friday and Monday.

The Conference Board’s March consumer confidence survey is due on Tuesday. Analysts anticipate an increase from February’s 130.8. The University of Michigan survey is forecast to match the prior month reading of 102. The final revision of fourth-quarter GDP should reflect 2.8-percent growth, up from the prior calculation of 2.5 percent. February pending home sales are expected to decline 4.7 percent.

Economists expect weekly jobless claims of 230,000 and a strong rise in personal income of 0.4 percent for February, with consumer spending and core inflation rising 0.2 percent.

The United States reached a deal with South Korea on trade last week and Treasury Secretary Steve Mnuchin is hopeful for a deal with China.

China launched its own oil futures contract on Monday. As the largest importer of oil, China is expected to become the third price setter for global oil prices, alongside the Brent contract in Europe and West Texas Intermediate in the United States. The Shanghai future priced oil at $68 a barrel versus $70 for Brent and $65 for WTI on Monday. Volume in the Shanghai contract exceeded that for the Brent contract in the first day of trading.

Kim Jong-un reportedly made a surprise visit to China on Monday ahead of talks with President Trump, his first ever. Relations have deteriorated in the wake of North Korea’s nuclear testing. The sudden meeting ahead of talks suggests the potential for a major deal. Although China has grown weary of North Korea in recent decades, it still regards the nation as a strategic ally with U.S. forces stationed in South Korea.

The U.S. Dollar Index declined to start the week to its lowest level in a month. The dollar fell against the euro but rallied against the yen. The 10-year Treasury yield moved higher on Monday but remained near its two-month low. The 30-year yield declined.

Walgreens (WAG) will headline a light week for earnings reports. Paychex (PAYX), lululemon (LULU), Factset Research Systems (FDS), Sonic (SONC), Constellation Brands (STZ) and BlackBerry (BB) will also report.

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