March 15 – March 19 Week in Review
It was a tough week for the stock market last week. The S&P 500, down 0.8%, the Dow Jones Industrial Average, down 0.5%, and the Russell 2000, down 2.8%, all set intraday and closing record highs in the first half of the week, but they eventually ran into selling pressure as long term interest rates continued their march higher. The Nasdaq Composite declined 0.8%, while the Russell 2000 finished with a 3% decline.
Economic data was mixed last week. February retail sales, industrial production, and housing starts/permits data were softer than expected, while the Philadelphia Fed Index soared to 51.8 in March from 23.1 in February. Many think the data will turn more positive in March like the Philly Fed Index, as the $1.9 trillion stimulus package trickles through the economy.
Also last week FOMC and Fed Chair Powell struck a dovish and patient tone regarding monetary policy following their two day policy meeting on Wednesday, which satisfied the market and temporarily calmed down the Treasury market.
The results of the meeting were there were no changes to the fed funds rate and the median estimate that the fed funds rate would remain unchanged through 2023. Fed Chair Powell said it wouldn't be time to start talking about tapering until the Fed sees actual substantial progress on employment and inflation.
Despite Chairman Powell’s assurances the 10 year U.S. Treasury yield flirted with 1.76% amid persistent growth and inflation expectations. Selling interest was further supported by the Bank of Japan widening its trading band around 0.00% for the 10 year JGB to 50 basis points from 40 basis points and the Fed letting the Supplementary Leverage Ratio (SLR) exemption for banks expire on March 31.
The 10 year yield ultimately settled at 1.73%, or nine basis points above last week's settlement and the 2 year yield closed at 0.16%. The higher rates worked against the information technology sector and the energy, financials, and real estate sectors also underperformed. The communication services, health care, and consumer staples sectors closed higher.
In other markets the U.S. Dollar closed at 91.74 up fractionally for the week. WTI crude futures fell 6.3% to $61.45 a barrel amid some lingering concerns about the recovery in global oil demand due to Europe struggling with another rise in coronavirus cases. Gold climbed higher closing at $1,744.50 per ounce.
March 22 – March 26 Economic Calendar