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Weekly Update

Market Summary

U.S. stocks finished lower for the week as market participants dialed back on bullish sentiment following additional disappointing global economic growth data, including a weak U.S. jobs report, and some skepticism around progress of the U.S.-China trade negotiations. For the week, the Dow and the S&P 500 both dropped 2.2% and the NASDAQ was down 2.5%. However, it was only the second week so far this year that U.S. equities have broadly finished in negative territory.

Decelerating economic growth has been particularly acute in Europe and China. At its February meeting, the European Central Bank (ECB) postponed interest rate hikes to 2020, lowered its GDP expectations and launched a new round of loans to banks in an effort to spark growth in the Eurozone. Germany showed an unexpected fall in factory orders on Friday and many are fearing disruptions due to Brexit as negotiations go down to the wire. Weak trade data from China also revealed exports in February tumbling 20.7% from a year earlier.

Last week was capped off with a disappointing U.S. jobs report that showed hiring falling sharply in February as the U.S. economy added just 20K jobs, below the consensus estimate for 175K and last month's revised number of 311K. The unemployment rate fell to 3.8% from 4.0% and average hourly earnings were up 3.4%. National Economic Council Director Larry Kudlow called the drop in the headline number "fluky", due to temporary headwinds from the government shutdown and a disconnect with the ADP employment report that showed 183K jobs added in February.

On the geopolitical front, both U.S. and Chinese administrations have conveyed an optimistic tone on trade talks, but more reports have cited stumbling blocks in negotiations, particularly on discussions of enforcement. Washington has been pushing Beijing to agree to a so-called enforcement mechanism that would allow the U.S. to monitor China’s behavior and impose penalties for violations, while China is seeking to include its own retaliation rights.

Tomorrow marks an important milestone in global events as the British Parliament is set to vote on Prime Minister Theresa May’s deal for leaving the European Union for a second time after a previous version of the agreement was rejected by Parliament. If Mrs. May’s deal is rejected again, lawmakers would then vote on whether to accept a no-deal Brexit or to reject it and delay the withdrawal process. That could increase the chances of a second referendum.

Economic Highlights:

Monetary Policy: The Fed does "not feel any hurry" to change the level of interest rates again, according to Chair Jerome Powell, as the central bank watches how a slowing global economy affects the U.S. He told CBS's 60 Minutes that current rates were "roughly neutral," meaning they are neither stimulating nor curbing the economy.

Service Sector: The U.S. service sector continues exhibit strength as the ISM Non-Manufacturing Index rose to 59.7 in February from 56.7 in the prior month, exceeding expectations for a 57.3 reading.

US Economy – The Week Ahead

Tuesday 3/12/2019

  • NFIB Small Business Optimism Index – Consensus: 102.0 (0.8% MoM), Prior Month: 101.2 (-3.1% MoM)
  • U.S. Consumer Price Index (CPI) Year-Over-Year – Consensus Estimate: 1.6%, Prior Month: 1.6%

Wednesday 3/13/2019

  • U.S. Producer Price Index (PPI) Year-Over-Year – Consensus Estimate: 1.9%, Prior Month: 2.0%
  • Construction Spending Month-Over-Month Growth – Consensus Estimate: 0.4%, Prior Month: -0.6%
  • U.S. Durable Goods Orders Month-over-Month Growth – Consensus Estimate: -0.7%, Prior Month: 1.2%

Thursday 3/14/2019

  • Initial Jobless Claims – Consensus Estimate: 225,000 (0.9% WoW), Prior Week: 223,000 (-1.3% WoW)
  • New Home Sales – Consensus Estimate: 610K (-1.8% MoM), Prior Month: 621K (3.7% MoM)

Friday 3/15/2019

  • Job Openings & Labor Turnover Survey – Consensus: 7,310K (-0.3% MoM), Prior Month: 7,335K (2.4% MoM)
  • University of Michigan Consumer Sentiment Survey (Preliminary) – Consensus Estimate: 95.6 (1.9% MoM), Prior Month: 93.8 (2.9% MoM)
  • Industrial Production (Month-over-Month) – Consensus Estimate: 0.45%, Prior Month: -0.60%
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