Market Direction Week of March 28, 2016

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Last Week Review: The equity markets took a bit of a breather, declining slightly after five straight weeks of posting gains. Talk of a greater desire to raise interest rates among a few Federal Reserve officials was the primary influence behind the mild selloff. As we have previously said, we are less concerned about the precise timing of rate increases and believe investors should prepare by reviewing asset allocation and making sure bond portfolios are appropriately laddered. We continue to think the environment remains mostly favorable for equities, as the pace of rate increases will likely be gradual and expected earnings growth should remain the primary driver of stock prices.

Major indexes were lower on the week, with the financials and energy sectors leading declining sectors. The Dow Jones Industrial Average fell 87 points to end the week at 17,516, down 0.5%. The S&P 500 fell 14 points to end at 2,036, down 0.7%. Bond prices were flat on the week, with the U.S. 10-year Treasury bond yield moving up only 0.03% to end the week at 1.90%.

How the market finished last week, the S&P 500 down 0.7%, the Nasdaq down 0.5%, and the Dow down 0.5%.

This Week: Next week is going to be stacked with potential market-moving reports so stay alert. On Monday the PCE Prices report (the preferred Fed inflation gauge) will be important after February’s Core PCE Price Index (1.67%) showed the largest month over month rise since January 2012. In addition, oil traders will probably put more emphasis on next Wednesday’s crude inventories report after yesterday’s surprise increase in stockpiles to all-time highs. Finally, the monthly Nonfarm payrolls number will get lots of press coming into Friday morning we will be receiving multiple PMI reports from China, Japan and the Eurozone. If this week’s breakdown in oil prices happens, rising Dollar and increased chatter of an April rate hike. In addition there will be numerous economic reports to move markets around next week so expect volatility and volume to increase.

Economic Calendar: International Trade in Goods (3/28), Personal Income and Outlay (3/28), ISM Mfg Index (4/1), Employment Report (4/1)

Some of the major earnings announcements on deck: CALM, LULU, LEN, PLAY.

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