Weekly Market Update – 12 March 2017 BMO

NOTICE: Monday 13 March 2017, US markets will open at 21:30 (9:30pm) (SG).

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U.S. Benchmark Indices – Mon 6 to Fri 10 March, 2017

A rate hike at next week’s FOMC meeting appears to be a mere formality following the better than expected Employment Situation Report for February, which crossed the wires early Friday morning. That seemed to be alright with investors as they pushed the major averages higher to finish a slightly disappointing week on a positive note. For the week, the benchmark S&P 500 lost 0.4%.

After posting six consecutive weekly gains, the stock market saw its third weekly decline of 2017. However, just like the other two weekly downticks, this week’s retreat was minor. The S&P 500 shed 0.4%, narrowing its first quarter gain to 6.0%.

The trading week started on an unassuming note with stocks showing limited reaction to a proposal put forth by House Republicans to replace the Affordable Care Act. President Donald Trump spoke favorably about the proposal, but Republicans in Congress have yet to fully support the effort, which has led to concerns that slow progress on the health care front would stymie corporate and personal tax reform, which the market has been anxiously awaiting.

Equity indices inched lower through the first three days of the week, but on Wednesday, it was crude oil that stole the attention, falling more than 5.0% to a fresh 2017 low near $50.30/bbl. The energy component snapped out of a five-point range that has held since the start of the year, responding to the news of yet another significant inventory build. Crude’s retreat continued over the next two days, leaving the energy component near $48.50/bbl at the end of the week. Oil lost more than 9.0% during the week while the energy sector surrendered 2.6% since last Friday.

There wasn’t much change on the central bank front as Wednesday came and went without any major surprises from the European Central Bank. The ECB made no changes to policy and did not hint at impending tightening even though the 2017 GDP growth forecast for the Eurozone was nudged up to 1.8% from 1.7%. It is worth noting that reports that circulated on Friday suggested the ECB may begin raising rates prior to the end of its asset purchase program. The news coincided with comments from Bundesbank President Jens Weidmann, who said 2017 eurozone inflation is likely to be “far higher” than projected.

As for the Fed, the central bank is now widely expected to announce its next rate hike on March 15 after the Employment Situation report for February did not upset the overall economic picture. With the report showing the addition of 235,000 payrolls, headline expectations (Briefing.com consensus 188K) were beat handily while average hourly earnings increased an in-line 0.2%, bringing the year-over-year growth rate to 2.8%.

The CME Fed Watch Tool now assigns an implied probability of 93.0%, up from 88.6% on Thursday, to a rate hike at the March 14-15 FOMC meeting after the February jobs report showed that nonfarm payrolls increased by 235,000 (Briefing.com consensus 188,000) and average hourly earnings rose 0.2% (Briefing.com consensus +0.2%). The Federal Reserve will announce its decision on Wednesday at 2:00 pm ET.

(Excerpts from Briefing.com)

Employment Situation Report for February and the February Treasury Budget:

Treasury Budget Maintains Similar Deficit Line in February

The Treasury Budget for February showed a deficit of $192.0 billion versus a deficit of $192.6 billion for February 2016. The Treasury Budget data is not seasonally adjusted, so the February deficit cannot be compared to the $51.3 billion surplus registered in January. Total receipts in February were $171.7 billion while total outlays were $363.8 billion. Receipts were $2.6 billion more than receipts in February 2016. Total outlays were $0.32 billion less than the same period a year ago.

Bonds yields

Commodities were mostly lower for the week with Crude falling below $50. The Friday’s tumble left the energy component 8.8% lower. Wednesday’s bearish EIA inventory report, which showed record high U.S. inventories. WTI crude finished the Friday session at $48.49/bbl.

Agriculture Closing Prices

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Screen Shot 2017-03-12 at 8.29.43 PMTHE WEEK AHEAD

Monday 06 to Friday 10 March (Week 11)

The eleventh week of 2017 (wk11) is Bullish for the DIA and SPY with more than 80% over 5 years, more than 70% over 10 years and more than 60% over 15 years.

The 2017 Stock Trader’s Almanac’s averages the DOW and S&P500:

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Key Economic Dates

Tue 14 Mar

Wed 15 Mar

Thu 16 Mar

Fri 17 Mar

SUMMARY

Without doubt, I am long next week given the statistical advantage favouring the Bulls. But before we get too carried away with the long trades, let’s keep in mind that next week (wk12) has been bearish for the last five years. Thus, I will be booking profits before the weekend just in case.

Happy Hunting!

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