Bears will try to break key support levels over this holiday shortened week. Over the past several days, a number of sectors and indexes bounced off support levels, including biotechnology and the S&P 500 Index which hit their 50-day moving averages. Additionally, the Dow Transports hit its 200-day moving average. Bulls are winning in early Monday trading though, with gains in Asia and Europe carrying over to the U.S. market. Investors are optimistic that more central banks, including China, will ease policy to boost economic growth. These expectations have pushing the U.S. dollar higher as well today.
Oil prices continue to confound both the bulls and bears. Following last week’s rally above $50 a barrel, oil has since slumped back into the $40s. The move higher came in the wake of Saudi Arabia’s air strikes against Yemen. Since then, other Arab nations such as Egypt have pledged support for Saudi Arabia and calm has returned to the oil market. Also putting pressure on prices is a potential nuclear deal with Iran. Some analysts estimate Iranian oil exports could rise by 1 million barrels per day if sanctions are lifted and the world market already has a surplus of approximately 1 to 2 million barrels per day. There’s also speculation that Iran has been storing excess oil production in anticipation of sanctions being eased.
The Nasdaq and Russell 2000 will battle it out for best performing domestic index as the first quarter concludes on Tuesday. Through Friday, the Nasdaq was up 3.28 percent and the Russell 2000 was up 2.96 percent. Meanwhile, the S&P 500 Index has only gained 0.10 percent. The worst performing indexes remain the Dow Utilities and Dow Transports, down 6.08 percent and 4.81 percent, respectively. Biotechs have lifted the healthcare sector (XLV) to a 7.11 percent return. Consumer cyclicals (XLY) were the next strongest sector among S&P 500 sectors, up 4.17 percent. Homebuilders (XHB) have gained 6.22 percent.
European markets benefited from quantitative easing during the first quarter. Germany, Portugal, Italy and Ireland’s stock markets have all gained more than 20 percent this year. Among commodities, only gold and silver are up, most likely due to Europe’s easing policy. The U.S. dollar was the best performing currency; it had gained more than 7 percent this year as of this past Friday.
There’s no shortage of economic data coming out this week. This morning, the Bureau of Economic Analysis released the personal spending figures for February. Expectations were for a 0.3 percent increase, but it came in higher at 0.4 percent. Spending was below expectations, pushing up the personal savings rate to 5.8 percent, the highest it has been since 2012. Stronger income growth will increase expectations of a rate hike by the Federal Reserve, given the Fed’s focus on jobs and wages.
Later in the week, the Chicago PMI, consumer confidence and Markit PMI will be released, plus important data relating to construction spending, trade deficit and factory orders in February. On Friday, the unemployment rate for March will be announced. Overseas, China’s PMI and Eurozone inflation will also be closely watched.
This coming days will be light on earnings ahead of the big kickoff to first quarter earnings season next week. Monsanto (MON) and Micron Technology (MU) are the significant reports this week.