February’s volatility gave way to a substantial rally over the first few days of March with a spike on Tuesday that was maintained throughout the week. The People’s Bank of China lowered bank reserve requirements, fueling a rebound in commodities. West Texas Intermediate Crude Oil gained approximately 7 percent on continued OPEC production freeze rumors. Energy sector stability reduced risk exposure for financial institutions with ties to oil and gas investments, while strong jobs data boosted rate hike expectations late in the week. Financial Select Sector SPDR (XLF) beat overall averages by more than 4.5 percent. SPDR S&P Regional Banking (KRE) is up almost 10 percent in four days of March trading. Asian and European markets also posted strong gains on the week. MSCI Emerging Markets (EEM) and iShares MSCI EAFE (EFA) gained 5.7 and 3.8 percent, respectively.
Eurozone inflation turned negative as consumer prices fell 0.2 percent in January, exceeding consensus estimates. The news could pressure finance ministers to loosen monetary policy when the European Central Bank meets on March 10 in an effort to lift equities. Chinese PMI manufacturing and services data revealed continued slowing in the world’s second largest economy. Investors thus raised expectations for a stimulus package in China, which pushed emerging market stock and commodity prices higher.
In the United States, the ISM Manufacturing Survey beat analyst forecasts of 48.6 with an essentially neutral reading of 49.5. The Federal Reserve Beige Book report released on Wednesday was also encouraging. Economic activity increased in most regions of the country, labor markets strengthened, consumer spending increased and credit standards in most parts of the country remained stable. Construction spending grew 1.5 percent in January, well above the 0.2 percent growth forecast. Weekly unemployment claims were 278,000 according to Thursday’s report, slightly higher than estimates. February unemployment, however, was released on Friday and assuaged weekly claims concerns, reporting 4.9 percent unemployment, 242,000 new jobs added and prior month data revised higher.
Dollar Tree (DLTR) reported numbers below estimates, but shares of the company rose on strong same-store sales growth and improving performance in recently acquired Family Dollar stores. Costco (COST) shares rebounded despite two consecutive quarters of lower-than- expected sales, revenues and growth as details emerged regarding membership fee increases and the expiration of the chain’s partnership with American Express set for March. The Kroger Co. (KR) sold off 7 percent after missing top-line revenue targets, in spite of reporting its 49th consecutive quarter of positive same-store sales growth. Staples (SPLS) dipped in premarket trading following missed estimates, but shares climbed back during morning trading. SPDR Retail (XRT) rose nearly 4 percent on the week amid the flurry of retail earnings.