Market Perspective for March 6, 2017

Equity markets look to build on their new all-time highs this week. Overall, economic data remains strong and companies are reporting excellent earnings and sales. As of this week, 98 percent of the S&P 500 has reported earnings. Of this group, 65 percent have beaten earnings-per-share estimates and 53 percent have reported sales that were above expectations.

The week will culminate with the closely watched monthly jobs report. Economists predict 185,000 new jobs were created in February and the unemployment rate dropped to 4.7 percent. The odds of a Federal Reserve rate hike have surged as high as 88 percent in recent days. Historically, markets have rallied during the early stages of a rate hike cycle.

The Royal Bank of Australia (RBA) and the European Central Bank will deliver their latest interest rate announcements on Tuesday and Thursday. Analysts expect the central banks will leave rates unchanged, though Eurozone inflation may lead the ECB to scale back its quantitative easing programs.

Another large oil inventory build is expected with Wednesday’s weekly report. West Texas Intermediate Crude hasn’t sustained a rally above $54 since hitting that price on December 12.

On Thursday, investors will pore over the last weekly unemployment claims figure before the Fed’s meeting next week. Last week, initial claims for unemployment plunged to 44-year lows. Chinese Consumer Price Index (CPI) and Producer Price Index (PPI) will be released later in the week. The CPI is forecast to increase 2.6 percent. Analysts expect the PPI to show a 7.8 percent uptick. In recent years, slowing growth on the Chinese mainland has weighed on the commodity prices and the global economy.

Earnings season is wrapping up with smaller retailers, such as Urban Outfitters, Express, Inc., and Dick’s Sporting Goods. Investors will also hear from tax preparer H&R Block and homebuilder Hovnanian. Shares of Urban Outfitters (URBN) missed forecasts last quarter, but analysts expect improved data over the past quarter.

Express, Inc. (EXPR) is expected to beat estimates based on higher foot traffic and improved online sales. Athletic apparel and equipment retailer Dick’s Sporting Goods (DKS) is forecast to show an increase in earnings despite declining sales.

H&R Block (HRB) is also expected to beat analysts’ estimates. Economists expect Hovnanian (HOV) to benefit from the strong housing market. Homebuilding funds such as iShares U.S. Home Construction (ITB) are trading at new 52-week highs, but shares of HOV are 20 percent below their December 2016 peak.

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