Market Perspective for March 27, 2017

Healthcare and consumer discretionary opened the week on a strong note, while the broader market pulled back in response to gridlock over proposed healthcare reform. Pharmaceuticals gained more than 1 percent on Monday as Celgene (CELG) and AstraZeneca (AZN) both rallied strongly. On Monday, the Chinese government approved AstraZeneca’s lung cancer drug Tagrisso for sale.

Economic data will be light this week. On Tuesday, the February advance trade in goods is forecast to show a $65.5 billion deficit, improving from $69.2 billion in January. January’s Case-Schiller Home Price Index is expected to hold steady at 5.6 percent growth. The consensus says the Conference Board’s Consumer Confidence for March will ease to 114, down slightly from 114.8 in February. February pending home sales data will be available on Wednesday.  Economists are looking for a 2.4 percent increase, reversing the 2.8 percent dip in January.

The third and final estimate of 2016 fourth quarter GDP will be out on Thursday. Economists predict the estimate will improve from 1.9 to 2.0 percent.

The Federal Reserve’s preferred inflation measure, core personal consumption expenditures (PCE), is due out on Friday. The consensus predicts PCE inflation rose 1.7 percent year-on-year, and 0.2 percent month-on-month. The University of Michigan Consumer Sentiment survey will also be out. It is expected to hold steady at 97.6.

Interest rates may test short-term support this week. The four-month low for the 10-year Treasury yield is 2.31 percent. On Monday, the 10-year Treasury yield traded at 2.37 percent. This support level has been tested and held three times in 2017. The U.S. dollar continued to consolidate on Monday. The failure of the GOP’s healthcare reform bill dealt a short-term blow to tax reform optimism.

A few companies are scheduled to report earnings in the interim period this week.  Analysts expect Carnival (CCL) will report earnings of $0.35 per share on Tuesday, down from $0.39 cents last year. On Wednesday, the consensus calls for earnings of $1.01 per share at lululemon (LULU) and $0.54 at Paychex (PAYX), both up from year-ago levels. On Friday, analysts are looking for a loss of $0.04 at Blackberry (BBRY), 2 cents better than last year.

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