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Market Summary

Major U.S. equity indices climbed further this past week to their highest levels since November 8, just below their all-time highs, with increasing optimism over U.S.-China trade negotiations driving improving sentiment. For the week, the Dow, S&P 500, and NASDAQ gained 0.6%, 0.7%, and 0.8%, respectively. Despite some recent weakening in U.S. economic fundamentals, rising investor sentiment has driven equities higher due to optimism on trade, the Federal Reserve’s recent monetary policy pivot, and generally positive corporate earnings results.

Positive sentiment has carried into this week’s early trading after President Trump announced that he would delay the deadline to raise tariffs on $200 billion of Chinese goods from 10% to 25% that was originally scheduled to occur March 1st.  President Trump cited substantial progress in trade talks between American and Chinese officials with compromises on key issues, including intellectual property and the trade of agriculture and energy products. However, uncertainty still remains as the two sides did not sign an official agreement and the White House did not release details.

Meanwhile U.S. economic readings have increasingly indicated slowing, albeit still expansionary, rates of economic growth driven by slowing foreign growth, geopolitical uncertainty, and the 2018 year-end financial market sell-off, among other factors. Core capital goods orders, a key indicator of business investment, fell -0.7% in December as more businesses have put capital investment plans on hold for more clarity on the above factors.

Overseas, British Prime Minister Theresa May announced yesterday that a final vote on her Brexit deal that had been scheduled for this week will now take place by March 12 — just 17 days before Britain is scheduled to leave the E.U. The delay is an effort to secure tweaks to the agreement that will make it palatable to British lawmakers. The E.U. is reportedly also considering a delay for the U.K. to stay in the bloc until 2021 if the Brexit deal isn’t approved by Parliament, according to Bloomberg.

Economic Highlights:

Monetary Policy: Minutes from the January Federal Open Market Committee (FOMC) meeting suggested that policymakers will pursue a patient, data-dependent policy approach, in light of tightening financial conditions and uncertainties surrounding global geopolitics and slowing growth.

Oil: Oil prices rose 3.0% last week following reports that U.S. sanctions are keeping Venezuelan crude oil supply off the markets. However, oil prices are back under pressure this week after a tweet from President Trump stating that oil prices were getting too high and asking OPEC to “relax and take it easy” on supply cuts.

US Economy – The Week Ahead

Tuesday 2/26/2019

  • Housing Starts – Consensus Estimate: 1,250K (-0.5% MoM), Prior Month: 1,256K (1.9% MoM)
  • S&P/Case-Shiller Home Price Index Year-over-Year Growth – Consensus Estimate: 4.5%, Prior Month: 4.7%

Wednesday 2/27/2019

  • Pending Home Sales Index – Consensus Estimate: 99.3 (0.3% MoM), Prior Month: 99.0 (-2.2% MoM)
  • Wholesale Inventories Month-over-Month Growth – Consensus Estimate: 1.1%, Prior Month: 0.4%

Thursday 2/28/2019

  • Initial Jobless Claims – Consensus Estimate: 220,000 (1.9% WoW), Prior Week: 216,000 (-9.6% WoW)
  • U.S. Fourth Quarter GDP Growth Year-over-Year (First Preliminary) – Consensus Estimate: 3.0% (2.5% QoQ), Prior Quarter: 3.0% (3.4% QoQ)

Friday 3/1/2019

  • Personal Consumption Expenditure (PCE) Index Year-over-Year – Consensus Estimate: 1.7%, Prior Month: 1.8%
  • ISM Manufacturing PMI – Consensus Estimate: 55.7 (-1.6% MoM), Prior Month: 56.6 (4.2% MoM)
  • University of Michigan Consumer Sentiment Survey (Final) – Consensus Estimate: 95.8 (5.0% MoM), Prior Month: 91.2 (-7.2% MoM)
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