For the week ending March 4, 2016, the stock market finished up for the third straight week. On a predominantly up week, both the Dow and the S&P 500 ended higher after breaking out of their range. In other news: the U.S. creates a record number of jobs in February; U.S. exports fall to the lowest level sing mid-2011; and, China lowers its economic growth forecast for 2016. Below is a recap of the markets for each day of the week.
The markets dropped on Monday as pending home sales fell and despite crude oil prices firming. Oil rose $1.06 to $33.90. The Dow lost -0.8 percent to 16,513; the S&P 500 lost -0.81 percent to 1,932.
On Tuesday, the markets rallied on upbeat economic data and dovish comments from a key FOMC voter. Oil remained relatively flat at $33.89. The Dow rose 2.1 percent to 16,865; the S&P 500 rose 2.39 percent to 1,978.
The markets rose again on Wednesday led by a stronger than expected gain in ADP’s employment report and growth in the labor market in the labor market as cited in the Fed’s Beige. Oil rose $0.84 to $34.73. The Dow gained fractionally to 16,899; the S&P 500 gained 0.41 percent to 1,986.
The markets on Thursday rose on a strong factory orders report. Oil remained relatively flat at $34.69. The Dow rose 0.26 percent to 16,944; the S&P 500 rose 0.35 percent to 1,993.
The markets Friday ended higher on a very strong jobs report of 242,000 non-farm payrolls plus a strong gain in oil. Oil rose $1.64 to $36.33. The Dow rose 2.2 percent to 17,006; the S&P rose 0.33 percent to 2,000.
U.S. stocks rose for the third straight week. Largely due to a strong jobs report and rising oil prices, the Dow ended up 2.20 percent (367 points) for the week, with the S&P 500 rising 2.67 percent (52 points). The strong employment report on Friday, with the unemployment rate remaining at 4.9 percent, increases the possibility of a Fed rate hike this year; possibly in March or June. Global stock markets were also higher this week with Europe showing the highest gains while Asia had modest gains.
The U.S. creates a much higher than expected 242,000 jobs in February while the unemployment rate remains at 4.9 percent. In addition, jobs numbers for December and January were revised upward for a net gain of 30,000 non-farm payrolls. Despite the big gain in new jobs, average hourly wages declined -0.1 percent (or 3 cents per hour) as did hours worked per week (down to 34.4 hours, the lowest level in two years). Labor force participation rose to 62.9 percent, the highest level since May of last year. A disturbing fact is that most of the jobs are in the retail area, indicating that they are low
U.S. exports fall to their lowest level since mid-2011. This is the fourth month straight that exports have dropped, and it is unlikely to end soon. The latest drop contributed to a 2.2 percent increase in the nation’s trade deficit, with the trade gap rising to a seasonally adjusted $45.7 billion for January. Exports slid -2.1 percent to $176.5 billion due to a strong dollar and weak global economy; imports also fell -1.3 percent to $222.1 billion, the smallest amount since April 2011. Imports of autos and auto parts set a record, reflecting strong sales of new cars and trucks in this country.
China lowers its target for economic growth in 2016. Giving itself a little leeway, China set its growth target at 6.5% to 7% (this is still a relatively high pace). Premier Li Keqiang laid out the policies and goals for the year at the National People’s Congress on Saturday aimed at stimulating growth and encouraging the restructuring of industries experiencing overcapacity. It is still unclear how the government will balance growth objectives with reform goals, which economists say will be difficult to achieve.
The bottom line: employment growth remains strong, but global demand continues to weaken which will impact U.S. economic growth. Given global economic weakness and the lack of wage growth, it is still uncertain if the Fed will raise rates in March or June.
The focus next week in the U.S. will be import and export prices on Friday, the petroleum status report, and jobless claims. Globally, the focus will be the ECB Governing Council meeting on Thursday and second estimates for fourth quarter GDP. In addition, the focus will be on the following: UK (Industrial Production, Merchandise Trade Balance); Eurozone (European Central Bank Monetary Policy Announcement, GDP); Germany (Manufacturing Orders, Industrial Production, Merchandise Trade); China (Consumer Price Index, Producer Price Index); and Japan (GDP, Producer Price Index).
Year-to-date the markets are down: Dow -2.4%; S&P500 -2.2%; Nasdaq -5.8%.
The Markets for the past week were: DJIA up 2.2%; S&P500 up 2.7%; Nasdaq COMP up 2.8%.
Commodities (ETFs) for the past week were: Gold (GLD) up 2.93%; Silver (SLV) up 5.28%; Oil (OIH) up 13.24%; Dollar (UUP) down -0.75%; 30-year Bonds (TYX) rose 6 basis points to 2.70%.
The VIX this past week (a measure of market sentiment and volatility) dropped to 16.86%. This reflects the rise in oil prices and a strong employment report.
To see what’s on the calendar for next week, go to the Econoday calendar.
The economic calendar for next week is light:
o Monday – nothing
o Tuesday – nothing
o Wednesday – EIA Petroleum Status Report
o Thursday – Jobless Claims, Treasury Budget
o Friday – Import and Export Prices
If you’re trading options, it is suggested trading Put Credit spreads for next week at 2.0 standard deviations or greater. Expect the price of the SPX to fall within 1904 and 2100 (2 standard deviations).
For more information about options, see the ‘Suggested Links’ below.