Rover's Weekly Market Brief - 3/18/2016

March 18, 2016 |

Indices

Dow Jones: 17,602.30 (+2.1%)

NASDAQ: 4,795.65 (+0.9%)

S&P 500: 2,049.56 (+1.5%)

Commodities

Gold: 1,255.06 (-0.2%)

Dollar Index: 95.10 (-1.2%)

Crude Oil: 39.31 (+3.1%)

Economy

The Federal Open Market Committee (FOMC) kept the target Federal Funds Rate unchanged at 0.25% to 0.50% at its March meeting. The Committee lowered its assessment of the overall economy, inventory investment, and net exports but continued to describe the labor market as “strong.” The announcement makes a rate hike in April, and perhaps June, unlikely. The Committee reduced its expected year-end target rate from 1.4% to 0.9%.

Retail sales were down in February as consumer spending fell. February month-over-month sales were down -0.1% but had a positive reading of 0.3% excluding autos and gas. Additionally, retail sales for January were sharply revised downward to -0.4% from 0.2%.The report confirms that consumer spending although strong YoY was weak in the start of 2016. The University of Michigan’s consumer sentiment index fell to 90, its lowest level since October. 1-year consumer inflation expectations rose .2%.

The Consumer Price Index for All Urban Consumers (CPI-U) fell 0.2% in February dragged down by energy. The Food index rose 0.2% while the energy index declined 6% in February. The index for all items less food and energy rose to 2.3% YoY . The gains were largely due to increases in health care costs, including a 0.9% increase for prescription drugs.

Housing starts increased 5.2% to a five-month high mostly driven by an increase in construction of single family homes.

Oil futures hit 2016 highs on Friday amid continued news of a possible deal among OPEC members to freeze production. On Wednesday Qatar’s Minister of Energy announced OPEC and other oil producers would meet on April 17.

Markets

The S&P 500 rose for the 6th straight session and the 5th straight week. The market's continued strong performance wiped out nearly all of the losses from the beginning of the year. The S&P 500 Volatility Index (VIX) declined steadily this week to close at 13.95.

Despite the week's overall gains, health care and biotech stocks suffered losses, including massive loses for Valeant Pharmaceuticals (VRX) after major cuts in its earnings-per-share and revenue expectations and disappointing fourth quarter earnings-per-share results.

The materials sector was strong, including gains for Freeport-McMoRan (FCX) and Dow Chemical (DOW). Energy stocks, including Chevron Corp (CVX) and Exxon Mobile (XOM), posted gains following the announcement of an April meeting of OPEC members to discuss freezing production.

FedEx (FDX) posted an 8% rise in revenue and a 19 drop in net income. Diluted earnings per share were down 16% to $1.84 from $2.18 the same quarter in 2015. Revenues rose across all segments driven by online shopping. Shares increased 11.8% after reporting earnings that exceeded expectations. FedEx's results contributed to gains in transportation and industrial stocks including General Electric (GE) and Boeing (BA).

Tiffany's (TIF) revenue declined 3% while net income fell 9% for fiscal year 2015. Diluted earnings per share fell to $3.83 from $4.20 in 2014. Revenue fell across business segments and was exacerbated by a stronger dollar.Consolidated comparable sales fell 6% year over year.

Looking Ahead

Upcoming Events:

Monday March 21 — Existing Home Sales (to gauge demand for housing, economic momentum)

Friday March 25 — Gross Domestic Product (the all-inclusive measure of economic activity)

Earnings Calendar:
Monday Tuesday Wednesday Thursday Friday
Petrobas (PBR) Nike (NKE) General Mills (GIS) PetroChina (PTR) Carnival (CUK)
Hang Seng Bank (HSNGY) SoftBank Group (SFTBY) Heineken (HEINY) Accenture (ACN) Cencosud (CNCO)

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