Market Direction Week of March 5, 2018©

Market Direction:BULLISH alert issued 2/15/2018

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Last Week Review: Markets fell last week, closing out February to the downside, and marking the first monthly loss for the U.S. stock market since October 2016.1 Volatility remained prevalent, with four of the five trading days during the week exceeding a 1% move. Following the 10% correction to start February, stocks have bounced up and down as markets weigh positive economic data against increasing policy and interest rate uncertainties. Our outlook remains positive, since the improving fundamentals of economic and earnings growth can support rising stock prices over time.

U.S. equity markets are trading lower for the fourth straight day as concerns over a potential trade war continue to drag on investor sentiment. The S&P 500 (SPX) started the week off on a high note but selling pressure emerged following some relatively hawkish commentary out of Federal Reserve Chairman Jerome Powell’s during his confirmation hearing on Tuesday. Powell suggested that the Fed is likely on track for four rate hikes this year, given the recent robust economic data, versus market expectations for only three. Then on Wednesday President Trump said that the U.S. would impose a 25% tariff on steel and a 10% tariff on aluminum imports starting next week. While the announcement of these two tariffs isn’t a complete surprise to market participants, the amount was higher than anticipated and Trump indicated that additional measures would be taken, sparking fears of a trade war.

After a week’s long holiday, Chinese equity markets rebounded on higher inflation expectations and a slightly weaker yuan. Separately, Chinese trade officials said they would retaliate if tariffs proposed by Commerce Secretary Wilbur Ross, on steel and aluminum imported to the US, are imposed. The 24% tariff was originally proposed by American steel companies and President Trump has indicated he supports it.

How the market finished last week, the S&P 500 down 2.0%, the Nasdaq up 1.4%, and the Dow down 3.0%.

This Week: Volatility back in focus as equity markets grapple with a potential trade war and more rate hikes. Next week will likely be volatile and headline driven so caution is advised.

Next week’s ADP and Nonfarm payrolls reports will be something to monitor due to the potential implications on inflation and interest rates. If you remember from last month’s report, average hourly earnings were up 0.3% (matching estimates) which translated into a 2.9% annualized gain (the highest since 2009), which added to recent concerns over inflation and weakness in equity markets.

Central bank meetings in Australia, Japan and Europe dominate the week, with the last of these the most important.

We also have the monthly US employment report, plus the services purchasing managers index (PMI) for China and the UK, and Institute of Supply Management (ISM) PMIs for the US.

Economic Calendar: ISM Non-Mfg Index (3/5), Factory Orders (3/6), International Trade (3/7), Employment Report (3/9)

Some of the major earnings announcements on deck: HRB, ROST, TGT, KR, PAY.

$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend. Cha-ching.

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