March 18 – March 22 Week in Review
The markets initially moved higher last week but ended up closing lower after a sharp sell-off on Friday as global growth concerns re-emerged spooking investors. The S&P 500 lost 0.77%, the Dow Jones Industrial Average lost 1.34%, the Nasdaq Composite lost 0.60% and the Russell 2000 turned in the worst performance with a steep loss of 3.07%.
The S&P 500 financial sector was the week's outright laggard, pressured by concerns that the flat yield curve will lead to weak net interest margins for lenders. Conversely, the consumer discretionary, real estate, and consumer staples sectors outperformed.
On Wednesday, the Federal Open Market Committee left the target range for the fed funds rate unchanged at 2.25-2.50%; signaled that it does not expect any more rate hikes in 2019 versus two rate hikes expected at the time of the December 2018 meeting; and said it will begin tapering its balance sheet runoff in May with an end date of Sept. 30th.
The Fed's pivot to an even more dovish mindset made it clear that the market doesn't have to fear the Fed like it did in the fourth quarter. At the same time, however, some viewed the pivot as a dim outlook for economic growth that won't translate well for earnings growth.
Nevertheless, the indication for no rate hikes in 2019 (and only one in 2020) sent U.S. Treasury yields noticeably lower across the curve, which was further accentuated by global growth concerns. For the week the 2 year yield dropped 12 basis points to 2.32%, and the 10 year yield dropped 13 basis points to 2.46%.
Growth concerns were reinforced by an earnings warning from FedEx, disappointing manufacturing data out of Europe, and declining exports out of Japan and South Korea. FedEx called attention to slowing international macroeconomic conditions and weaker global trade growth trends. Nike didn't help ease concerns after reporting underwhelming growth in North American sales when it reported earnings.
In overseas developments China confirmed trade negotiations with the U.S. will continue in Beijing this week and in Washington in early April. EU leaders offered to delay the Brexit date until May 22nd if British lawmakers approve Prime Minister Theresa May's deal this week.
In other markets last week the U.S. Dollar Index increased 0.1% to 96.65 and WTI crude increased 0.8% to $59.01 a barrel.
March 25 – March 29 Economic Calendar