Market Direction Week of April 4, 2016

 

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Last Week Review: Stocks were higher on the week with most of the gains occurring mid-week, after Federal Reserve Chair, Janet Yellen, commented that the Fed will raise rates at a slow pace. Members of the Federal Reserve have made recent statements suggesting that a healthier U.S. economy and rising inflation trends could support a rate hike in the near future. The Fed's next meeting is scheduled for April 26-27. Incoming economic data will continue to be interpreted against expectations for rate hikes over the balance of 2016, which is likely to drive further volatility. Positively, the fact that the Fed is targeting rate hikes this year is a signal that businesses and consumers are healthy enough to withstand higher borrowing costs over time. An improving outlook for the economy was supported last week by encouraging employment and manufacturing reports, consistent with our expectation for sustained, moderate GDP growth this year.

Major indexes were higher on the week, led by the technology sector. The Dow Jones Industrial Average gained 277 points to end the week at 17,793, up 1.6%. The S&P 500 moved 37 points higher to end the week at 2,073, up 1.8%. Bond prices were higher on the week, pushing the U.S. 10-year Treasury bond yield down 0.13% to end at 1.77%.

How the market finished last week, the S&P 500 up 1.8%, the Nasdaq up 3.0%, and the Dow up 1.65%.

This Week: Next week isn’t going to be nearly as busy on the economic front but I would keep an eye on the Eurozone and China PMI reports along with the ISM Services release on Tuesday. In last month’s ISM report the Employment Index component dropped below 50.00 for the first time since February of 2014. Investors will closely examine the Fed's meeting minutes from March, which will be released on Wednesday. Additionally, factory and durable goods orders, which will be released on Monday, will grab the markets' attention as investors will use it to determine if positive trends in the manufacturing sector are sustainable.

Economic Calendar: Factory Orders (4/4), International Trade (4/5), JOLTS (4.6) , FPMC Minutes (4/6)

Some of the major earnings announcements on deck: GBX, GPN, STZ.

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