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Newsletter: In the Markets – Week-Ending February 24th

by Peter J. Creedon

Newsletter: In the Markets – Week-Ending February 24th
Crystal Brook Advisors
We Make Financial Planning Crystal Clear

United States: Total billings fell into contraction territory in January, but the weak 70 reading follows a surge in December. The 6.1 drop in January, from 55.6 in December, was the largest since September 2008. We suspect the plunge into negative territory is largely payback from the prior month’s solid 60 reading rather than the start of a deleterious trend, especially given the 55 spike in billing inquiries. The inquiry index reached a score of 60 in January, the highest monthly reading in five months. (1)  The three-month moving average shows billings posted a second-straight 45 positive reading in January, following a soft patch from September through 40 November, which was likely due to a pullback in activity due to election uncertainty. We also note that billings slipped below the 50 demarcation in 35 January 2016 despite the seasonal adjustment. (1)

Europe: European bourses ended Friday’s session on a negative note, as weakness in the U.S., a fall in commodities and a slew of underwhelming earnings reports weighed on investor sentiment. (2)  The pan-European Stoxx 600 finished 0.76 percent lower, with the majority of sectors showing red by the market close. On the week however, the STOXX 600 closed only 0.06 percent down. (2)  Basic resources dragged down sentiment on Friday, sinking 2 percent down. Mining giants Rio Tinto and BHP Billiton fell around 3 percent each, with other miners also under-performing by the close. Gold however hit a three and a half month high during Friday’s trade. (2)

Asia:  Washington urgently needs a comprehensive geo-economic strategy to counter China’s hegemonic ambition to establish a Sino-centric sphere of influence. If unchecked, this threatens to weaken the U.S. security alliance system as well as displace the U.S.-led open and rules-based order that has brought relative stability and astounding prosperity to Asia since the end of World War II. (3) To be sure, when it comes to Asia policy, the White House has had a surprisingly good run after an uncertain and disruptive start. If recent development are any sign of the future, then the White House may be expected to take a more risk-tolerant yet measured approach toward challenging China’s hegemonic ambitions in Asia. However, there is no indication that the White House currently has, or even contemplates, a geo-economic strategy — that is, deliberately leveraging trade and financial tools to advance specific geopolitical and security goals. (3)

Latin America: The election on February 19 in Ecuador was another severe blow for the left in Latin America. After presidential election defeats in Argentina in 2015 and Peru in 2016, legislative vote setbacks in Venezuela in 2015, a referendum defeat in Bolivia in 2016 and municipal election losses in Brazil and Chile in 2016, Latin America’s left was hoping for a clean sweep in the presidential and legislative elections in Ecuador. (4) After almost two decades of electoral dominance in Latin America, left-wing coalitions are struggling at the polls. During the years of fat cows, voters preferred left-wing leaders, who implemented redistributive policies. Now that the region has entered the years of skinny cows, voters seem to be turning to right-of-centre, pragmatic leaders who campaign offering ways to restore growth and promote employment. (4)

Monday 2/20
  • Markets Closed
Tuesday 2/21
  • After the long weekend, investors returned to the market in a buying mood on Tuesday. Stocks gained in the morning on the back of several positive reports from the retail sector, which included earnings beats from Wal-Mart and Home Depot, and that momentum continued into an afternoon that saw investors excited about the latest merger news. (5)
Wednesday 2/22
  • U.S. equities closed mixed Wednesday after minutes from the Federal Reserve’s previous meeting hinted that a rate hike coming “fairly soon.” (2)
  • The Dow Jones industrial average closed about 30 points higher and notched its ninth straight record close, with DuPont and 3m contributing the most gains. Shares of DuPont rose after a Reuters report, citing sources, that EU antitrust regulators are set to clear DuPont’s merger with Dow Chemical. (2)
Thursday 2/23
  • Stocks wobbled Thursday as investors changed course and tempered their expectations for faster economic growth. Industrial companies, which have surged over the last few months, finished lower as Wall Street focused on gold, bonds, and companies that pay big dividends. (6)
Friday 2/24
  • The Dow Jones industrial average fell 0.2%, the S&P 500 futures 0.3% and the Nasdaq 0.4%. The Russell 2000 was off 0.7%. (7)
  • The stock market entered today’s session with the Dow up 0.9% for the week, leaning toward its third consecutive weekly advance. The S&P 500 showed a 0.5% gain, while the Nasdaq was down less than 0.1%. Both are within easy striking distance of a fifth straight weekly gain. (7)

Market Close

  • The yield on the 10-year Treasury note TMUBMUSD10Y, -2.42% shed nearly six basis points to 2.314% on Friday. Meanwhile, the S&P 500 SPX, +0.15% attempted to turn positive in late trade. The Dow Jones Industrial Average DJIA, +0.05% declined around 10 points, taking a slight breather after a run of 10 consecutive record closes. (8)

Contributor: Thomas Padula

Sources:  (1),Wells Fargo Economics Group (2), CNBC (3), The Diplomat (4), Buenos Aires Diplomat (5), Yahoo Finance (6),Washington Post (7), Investor’s Business Daily,(8), Market Watch