Stocks continued lower last week, with the S&P 500 losing another 0.51 percent. This was the third week-over-week decline in a row and left the benchmark index up only 0.13 percent 2016-to-date, and 3.95 percent below the record high hit in May of last year. One big factor behind the recent uptick in volatility is earnings season for the first quarter of 2016. Indeed, 71 percent of S&P 500 companies that already reported beat their earnings estimates, above the 5-year average, but only 53 percent of firms have released better-than-expected sales figures, below the 5-year average.
Continued uncertainty about global economic conditions also weighed on traders’ minds last week, with much of the focus being on the developing political disruptions in Brazil and the upcoming Brexit vote in the UK. Elsewhere, recent hawkish comments from Federal Open Market Committee (FOMC) members suggest that two hikes are a reasonable expectation for 2016 but the market is currently pricing in only around a 50 percent (coin flip) probability of any interest rate increase from the Fed occurring this year. All of these near-term issues mentioned above, though, are less of a concern for retirement investors who understand that persistent and long-term participation in the market, combined with dollar-cost averaging, can help enable them to benefit from rallies and turn drawdowns into opportunities. As always, we are here to help with any questions you may have.
To recap what we learned about the economy last week, the positives included that mortgage and refinance applications lifted, small business owner optimism rebounded, consumer sentiment surged, retail sales grew by more than expected, and the number of job openings in America rose to an almost record high. As for the negatives, U.S. businesses’ stock-to-sales ratios remained at recessionary levels, wholesale inflation pressures picked up slightly, and the number of Americans making first-time claims for unemployment benefits jumped. This week the pace of economic data picks up with lots of important reports on housing, manufacturing, employment, and inflation scheduled to be released, along with the potentially market-moving minutes from the latest FOMC meeting due out Wednesday afternoon.
What To Watch:
- Consumer Price Index8:30 AM ET
- Housing Starts8:30 AM ET
- Redbook8:55 AM ET
- Industrial Production9:15 AM ET
- E-Commerce Retail Sales10:00 AM ET
- John Williams Speaks 12:00 PM ET
- Robert Kaplan Speaks 1:15 PM ET
- MBA Mortgage Applications7:00 AM ET
- Atlanta Fed Business Inflation Expectations10:00 AM ET
- EIA Petroleum Status Report10:30 AM ET
- FOMC Minutes2:00 PM ET
- Jobless Claims8:30 AM ET
- Philadelphia Fed Business Outlook Survey8:30 AM ET
- Chicago Fed National Activity Index8:30 AM ET
- Bloomberg Consumer Comfort Index9:45 AM ET
- Leading Indicators10:00 AM ET
- EIA Natural Gas Report10:30 AM ET
- 10-Yr TIPS Auction 1:00 PM ET
Sources: Econoday, Bloomberg, Twitter, ZH, BofAML, Wells Fargo, Goldman Sachs
Post author: Charles Couch