A dovish Federal Reserve Board (FRB), falling oil reserves, strengthening European PMI data… the markets went up, right? Wrong!
The markets shed a little weight for the first time since early February. The week was marked by dovish language from the FRB, as well as oil inventories that reflected a draw down rather than the expected increase. These and other condition during the week should have led to a healthy growth week. To the contrary, volumes were light as investors are waiting to see how the 1st quarter earnings season is going to unfold.
US Data
Energy led sector growth for the week at 2.2%[1]. Much of that driven by a softening $ and favorable oil inventories. API Weekly Crude Oil Stockpiles were expected to expand by 2.9M barrels. In a surprising reversal inventories saw a 4.3M barrel draw down[2].
JOLT’s job openings came out at 5.445M openings, slightly lower than expected. Initial jobless claims fell to 267K[3]. Both data points affirm the FRB’s stance that the employment market continues to mend.
ISM non-manufacturing PMI data for the U.S. firmed more than expected as it came in at 54.5. The data indicates that perhaps fall weakness is dissipating, as the week before provided firming manufacturing PMI data as well.
International Data
Eurozone composite PMI data firmed last month. Despite the backdrop of controversial negative rates, quantitative easing, Syrian refugees, and a diverse economic landscape from Germany to Greece, Europe appears to be gaining some much needed steam.
Japan continues to struggle against a strengthening Yen (¥) as negative rates and stimulus packages have yet to firm inflation and consumption. The ¥ has advanced 10% against the $ year to date[4]. This currency strengthening is perplexing given economic weakness, regardless of ‘perceived’ safety in the ¥. Continued strength in their currency will begin to deteriorate corporate earnings.
Conclusion
In summary, while the week actually carried much data that should have drawn positive attention, fear over quarterly earnings kept many investors on the sideline. With only 3% of companies reporting 86.7% are beating estimates[5]… Granted it is a tiny sample size, but here’s to hoping!!!
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[1] www.jpmorganfunds.com – weekly market recap
[2] www.investing.com – economic calendar
[3] www.investing.com – economic calendar
[4] www.mfs.com – week in review
[5] www.putnam.com – economic update