Weekly Market Highlights

Global Equities Stumble Into Quarter End

  • Purchasing manager indices (PMIs), U.S. employment report and the ISM Manufacturing Index headline this week’s economic releases

Last Week’s Highlights

  • U.S. Existing Home Sales:
    +1.2% to SAAR of 4.88 million units in February.
  • U.S. Consumer Price Index:
    +0.2% in February month-over-month and flat year-over-year (core CPI increased 0.2% month-over-month and 1.7% year-over-year).
  • U.S. New Home Sales:
    +7.8% to SAAR of 539,000 units in February.
  • U.S. Durable Goods Orders:
    -1.4% in February (excluding transportation, durable goods orders decreased 0.4%).
  • U.S. 4Q 2014 GDP (third estimate):
    +2.2% annualized rate (unchanged from previous estimate).
  • Oil:  $48.87 ($2.87)
  • Gold:  $1,199.80 ($15.20)
  • U.S. 10-year Treasury:  1.95% (0.02%)
  • Dollar:  Euro--$1.09, Yen--119.20 (weakened against Euro and Yen)
  • VIX:  15.07 (2.05)

What to Watch for

  • Monday 3/30:  U.S. Personal Income and Outlays
  • Tuesday 3/31:  Case-Shiller Home Prices
  • Tuesday 3/31:  U.S. Consumer Confidence
  • Wednesday 4/1:  ISM Manufacturing Index
  • Thursday 4/2:  U.S. Trade Balance
  • Friday 4/3:  U.S. Employment Report

Last week provided another challenging backdrop for global equity markets as volatility edged higher once again. In the U.S., the S&P 500 declined -2.2% just one week after closing within 0.5% of the all-time high reached on February 25. Oil prices also continued to move in a seesaw fashion with fresh tensions in the Middle East related to Saudi Arabia and Yemen contributing to significant swings. Fixed income markets fared better—both investment grade and non-investment grade bonds, as represented by the Barclays U.S. Aggregate and BofA Merrill Lynch U.S. High Yield indices, finished flat and +0.3%, respectively.

Good Payroll Friday

U.S. markets are closed on Friday, but investors will still keep a close eye on the March employment report. The U.S. employment report is already one of the most closely watched economic releases as it provides a timely update on the health of the labor market and broader economy. Now that the Federal Reserve has tweaked its forward guidance and fully transitioned into “data dependent” mode, U.S. employment reports will take on even greater importance going forward. For financial markets, we would not be surprised to see volatility and pullbacks associated with stronger-than-expected payroll gains as it would pull forward the market’s expectation of Fed rate hikes. The consensus estimate for Friday’s nonfarm payrolls stands at a healthy 250,000 gain however it will be equally important to monitor average hourly earnings (expected to increase 0.2%).

2Q and Beyond

Our expectation of a more volatile environment in 2015 certainly came to fruition in the first quarter. Although the VIX volatility index closed at just over 15 on Friday, it has been a very choppy environment across equities, fixed income, commodities and currencies. Going forward, we anticipate more of the same, particularly with earnings season—and the spotlight on strong dollar headwinds for U.S. multinationals—around the corner. In this environment, we maintain a preference for U.S. small cap equities which tend to be more insulated from global turmoil and have greater exposure to stronger domestic growth trends. We are also more constructive on European equities; while Greece remains an uncertainty, we believe the broader region—with the support of the European Central Bank and a weaker euro—is beginning to move in the right direction and could provide upside potential based on reasonable valuations and a positive turn in sentiment.

Statistics on the Current State of the Market

S&P 500 Index -2.2% -1.9% 0.6%
Russell 1000 Index -2.2% -1.6% 1.2%
Russell 1000 Growth Index -2.2% -1.4% 3.6%
Russell 1000 Value Index -2.2% -1.9% -1.3%
Russell Midcap Index -2.0% -0.6% 3.3%
Russell 2000 Index -2.0% 0.7% 3.3%
DJ Industrial Average Index -2.3% -2.2% 0.0%
NASDAQ-100 Index -2.8% -2.4% 2.3%
MSCI EAFE Index -0.7% -0.3% 6.2%
MSCI Emerging Markets Index -1.1% -3.1% 0.5%
Alerian MLP Index 0.3% -4.9% -5.8%
Cash & Fixed Income      
Citigroup 10-Year Treasury Index -0.1% 0.6% 2.4%
Barclays US Aggregate Index 0.0% 0.3% 1.5%
Barclays Municipal Bond Index -0.1% 0.3% 1.0%
BofA Merrill Lynch U.S. High Yield Index 0.3% -0.7% 2.4%
Real & Alternative Assets      
FTSE EPRA/NAREIT North America Index -2.8% 0.9% 3.7%
FTSE EPRA/NAREIT Global Index -1.0% -0.1% 4.2%
Bloomberg Commodity Index -0.2% -3.9% -4.8%
Gold (NYM $/ozt) Continuous Future 1.3% -1.1% 1.3%
Crude Oil (NYM $/bbl) Continuous Future 6.2% -1.9% -8.6%

Data Source: FactSet and RIMES

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