Market Perspective for March 28, 2016

U.S. markets kicked off the week with modest gains for the Dow Jones Industrial Index and the S&P 500, while the NASDAQ slipped 6.72 percent following Pandora’s (P) surprise announcement that founder Tim Westergren will be assuming the role of CEO.  The streaming music service has lost over half its value over the past year and the stock tumbled again in reaction to Monday’s announcement.

Last week, markets saw a small decline after several Federal Reserve officials issued hawkish comments on inflation and interest rates, despite lowered rate hike expectations inferred at the Fed’s March 16th meeting. Speculators in the ever-changing futures market still do not expect an  April or June hike, though inflation expectations did fall.

Key data out this week includes the March employment report as well as Monday’s core PCE reading for February. The latter increased 0.1 percent in February, less than the expected 0.2 percent. On Friday, economists expect the government will report 200,000 new jobs were created in March, while the unemployment rate is forecast to remain unchanged at 4.9 percent. Average hourly wages are expected to have risen 0.2 percent. Strong job growth along with increases in wages and earnings could offset Monday’s inflation data, but the week will start off with a tailwind from lower than expected inflation in February.

February pending home sales reported 3.5-percent growth on Monday, exceeding estimates of 1.5 percent.  The Dallas Federal Reserve Manufacturing Survey also released encouraging data, indicating 3.3 percent growth and a rebound back into positive territory. In addition to the S&P/Case-Shiller House Price Index on Tuesday, Fed Chair Janet Yellen will be giving a speech to the Economic Club of New York. The Chicago Purchasing Managers Index (PMI) and weekly unemployment claims report will be released on Thursday. Analysts anticipate an expansionary reading above 50. European inflation data out on Thursday is expected to show deflation.

Friday’s reports will include light vehicle sales, the ISM manufacturing Survey and the University of Michigan Consumer Sentiment Index. All three reports are expected to indicate growth. March auto sales are projected to be 17.4 million. Chinese and European PMIs will also be out this week. Europe’s flash PMIs were generally positive last week and China’s PMI is always closely watched by commodities traders.

A few firms have yet to report prior quarter earnings. Sports apparel company lululemon athletica (LULU), memory chip giant Micron Technology (MU) and BlackBerry (BBBRY) will report this week. Analysts expect lululemon will report earnings per share of $0.80 on quarterly revenues of $691.6 million and Micron Technology (MU) will announce a net loss of $0.07 per share on revenues of slightly more than $3 billion.  BlackBerry (BBRY) is expected to deliver its latest quarterly earnings Friday and report a net loss of $0.09 per share on revenues of $563 million. Analysts will focus on the progress of new CEO Jon Chen’s turnaround strategy.

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