Telemus Weekly Market Review

February 26 – March 2, 2018

Stocks tumbled last week, with the S&P 500 dropping 2.04%. The Nasdaq Composite did a little better, and the Dow Jones Industrial Average did a little worse, losing 1.08% and 3.05%, respectively. The small-cap Russell 2000 showed relative strength, but still finished lower by 1.03%.

Last week actually began on a positive note, with the S&P 500 jumping 1.2% on Monday, but took a turn for the worse on Tuesday when new Fed Chairman Jerome Powell testified before the House Financial Services Committee. Mr. Powell’s prepared remarks didn’t contain any surprises, calling for a continued path of gradual rate hikes. However, in the Q&A session, Mr. Powell noted that his economic projections have increased since the December FOMC meeting, prompting a negative reaction on Wall Street due to concerns that the Fed may hike rates more than expected.
The Fed forecasted three rate hikes for 2018 at its December meeting, but, in light of Mr. Powell’s upwardly revised growth projections, investors have increased their expectations for a fourth hike. The CME FedWatch Tool places the chances of a fourth rate hike at 30.7%, up from 24.4% last week. The chances of a March rate hike are at 83.1%.

Fast-forwarding to Thursday, the equity market was dealt another blow, this time from President Trump, who announced that he’ll be imposing tariffs on steel and aluminum imports–25% for steel and 10% for aluminum. Mr. Trump’s decision prompted concerns about higher prices and retaliation from China and other trading partners.

However, outside of fundamental factors affecting last week’s sell off, it’s also important to note that the S&P 500 broke below its 50-day moving average, a key technical level that’s provided the market with support since the 2016 presidential election. The benchmark index dropped below its 50-day moving average for the first time in five months during the big sell off at the beginning of February and has ticked back above it a few times since–most notably on Monday, when the S&P 500 hit a three-week high.

The S&P 500 initially found support at its 50-day moving average on Wednesday, but selling accelerated after the index broke through the level on its second attempt. If last week’s selling continues, investors will be looking for other potential areas of support, including the S&P 500’s February low (2581) and its 200-day moving average (2561).

11 of 11 S&P 500 sectors finished last week in negative territory, with industrials and materials being the weakest performers. The technology, consumer staples, and telecom services groups exhibited relative strength, but the remaining sectors lost between 2.0% and 3.0%.

A slew of retailers reported earnings last week. TJX rallied 7.0% on Wednesday after reporting better-than-expected earnings and revenues for the fourth quarter and raising its profit guidance. Conversely, Lowe’s dropped 6.5% in the same session after missing Q4 earnings estimates and lowering its profit guidance for fiscal year 2019. The SPDR S&P Retail ETF finished last week lower, but ahead of the broader market, losing 1.4%.

In other corporate news, Comcast dropped 7.4% on Tuesday after upping a bid from 21st Century Fox for a large stake in British broadcaster Sky.

Interest rates were little changed last week. The 10 year U.S. Treasury note closed at 2.86% on Friday. Oil prices fell to a two-week low Friday closing at $61.45, weighed down by diminished risk appetite among investors and a larger-than-expected increase in crude stockpiles.

March 5 – March 9 Economic Calendar

  • Monday
  • PMI Services Index
    9:45 AM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • TD Ameritrade IMX
    12:30 PM ET
  • Randal Quarles Speaks
    1:15 PM ET
  • Treasury STRIPS
    3:00 PM ET
  • Lael Brainard Speaks
    7:00 PM ET
  • Robert Kaplan Speaks
    8:30 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Beige Book
    2:00 PM ET
  • Consumer Credit
    3:00 PM ET
  • Tuesday
  • William Dudley Speaks
    7:30 AM ET

  • Redbook
    8:55 AM ET
  • Factory Orders
    10:00 AM ET
  • 4-Week Bill Auction
    11:30 AM ET

  • Treasury STRIPS
    3:00 PM ET
  • Lael Brainard Speaks
    7:00 PM ET
  • Robert Kaplan Speaks
    8:30 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Beige Book
    2:00 PM ET
  • Consumer Credit
    3:00 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • William Dudley Speaks
    7:30 AM ET
  • Raphael Bostic Speaks
    8:00 AM ET
  • ADP Employment Report
    8:15 AM ET
  • William Dudley Speaks
    8:20 AM ET
  • International Trade
    8:30 AM ET
  • Productivity and Costs
    8:30 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Beige Book
    2:00 PM ET
  • Consumer Credit
    3:00 PM ET
  • Thursday
  • Challenger Job-Cut Report
    7:30 AM ET

  • Jobless Claims
    8:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET

  • Quarterly Services Survey
    10:00 AM ET

  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Beige Book
    2:00 PM ET
  • Consumer Credit
    3:00 PM ET
  • Friday
  • Employment Situation
    8:30 AM ET

  • Wholesale Trade
    10:00 AM ET
  • Charles Evans Speaks
    12:45 PM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Treasury STRIPS
    3:00 PM ET
  • Lael Brainard Speaks
    7:00 PM ET
  • Robert Kaplan Speaks
    8:30 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Beige Book
    2:00 PM ET
  • Consumer Credit
    3:00 PM ET

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. This market commentary is a matter of opinion and is for informational purposes only.  It is not intended as investment advice and does not address or account for individual investor circumstances.  Investment decisions should always be made based on the client’s specific financial needs, goals and objectives, time horizon and risk tolerance.  The statements contained herein are based solely upon the opinions of Telemus Capital, LLC.  All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, but not guaranteed.