Economic Market/Portfolio Happenings
Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
For the week ended March 15, 2018.
Equities were up across the major indices, with the benchmark S&P up 2.95%, the Russell 2000 up 2.13% and the NASDAQ up 3.81%. Overseas the international developed markets (MSCI EAFE) rose 2.81% while the emerging markets (MSCI EM) advanced 2.67%. All sectors rose in the S&P, with technology and health care leading the pack, and materials and industrials pulling up the rear. (1) “Risk on” continued to be the key phrase as inflation was reported below expectations—which is expected to keep the Federal Reserve from raising interest rates over the next few months—sustaining market valuation multiples. Additionally, there were further positive comments from both the Chinese and US governments regarding a trade agreement in the coming weeks.
Interest rates fell and values rose for most US government maturities, with the 10-year yield down 3 basis points for the week; it now stands 10 basis points below the rate at year end. (1) As noted above, the report on limited inflation pressures yields downward and is positive for bond prices.
West Texas Intermediate crude rose 4% to $58.51 per barrel (1) to its highest level in four months following a report by the Energy Information Administration on Wednesday that U.S. crude supplies fell by 3.9 million barrels for the week ended March 8. That ran counter to an increase of 3.3 million barrels expected by analysts. (2) Outside the US, however, crude production was well ahead of expectations in February as OPEC and its cohorts failed to meet its pledge to cut production. While the group agreed to cut production by 1.2 million barrels per day for the first half of 2019, it fell by just 221,000 barrels per day. (3)
In an apparent effort to reach a trade agreement with the US, Chinese legislators passed a law to discourage their governments from pressuring foreign companies to hand over technology. The measure is part of an investment law that aims to address complaints by most of its trading partners that China’s system is rigged against foreign companies despite Beijing’s assertions to the contrary. (4) Further, the Chinese premier said it is ready to roll out more economic stimulus to support economic growth in the 6-6.5% range this year. As a result, shares of Chinese stocks rose and their currency recovered from a 3 week low.
Core inflation in the US was reported below consensus expectations as consumer prices excluding volatile food and energy 2.1% on a year over year basis, again slowing from the nearly 3.0% reported last summer. (5) Interest rates declined following the report since investors now anticipate less risk of the Federal Reserve hiking rates for a potentially extended period of time on such subdued inflation.
Job openings rose to the third-highest level on record from a revised 7.48 million in December, with big increases in wholesale trade, real estate, and information industries. This took the ratio of open positions to those who seek them down slightly to 1.16 from 1.19 in December. The quits rate stayed at 2.3%, which is close to the 2.4% high this cycle. (6) Worker willingness to quit is taken a positive sign by economists, as it usually means they see better opportunities for higher pay and advancement elsewhere.
Industrial production edged up 0.1% in February, below Wall Street expectations of a 0.4% rebound after a sharp drop in the prior month. January output was revised up to a 0.4% drop from the prior estimate of a 0.6% decline: In February, the gains were concentrated in utility output and mining. (1)
As the UK continues to grapple with the concept of leaving the European Union, Prime Minister Theresa May emerged from a week of disappointments with a victory on Thursday as their parliament overwhelmingly voted to delay the UK’s departure from the EU on March 29. Business groups expressed relief that a sudden exist of Britain, or Brexit, seems unlikely although any extension will need unanimous approval from the EU’s other 27 states, potentially at their summit March 21-22. (7)
Proprietary portfolio happenings:
Apple Inc. (APPL), a G50 and Core Select holding, shares rose on a report that Apple gained share of the Chinese smartphone market in January and February, reversing trend. (8) Shares rose over 6% for the week.
Cloudera Inc. (CLDR), a G33 holding, reported a weak quarter after merging with HortonWorks and guided revenue growth for 2019 downward versus expectations. (9) Shares dropped 15% for the week.
Deutsche Post (DPSGY), a G40i holding, had reported revenues and earnings that exceeded expectations, and shares continued to gain on guidance that was also ahead of expectations. (10) For the week, the Germany-based parcel delivery company (operating as DHL in the US) saw shares rise 6.5%.
Did you know…
When the country of Montenegro became independent from Yugoslavia, its internet domain name went from .yu to .me.
Sources: (1) JP Morgan Weekly Recap 3/18/19, (2) Energy Information Administration, (3) Organization of the Petroleum Exporting Countries 3/14/19, (4) Reuters “China will follow through on new investment law” 3/15/19, (5) Bureau of Labor Statistics 3/12/19, (6) Bureau of Labor Statistics 3/15/19, (7) New York Times “Britain’s Parliament Votes to Delay Brexit” 3/14/19, (8) Morgan Stanley Positively Biased on Apple, (9) Cloudera, Inc. press release 3/13/19, (10) Deutsche Post press release 3/7/19