Stocks remained stuck in the snow on Wednesday, after a batch of economic reports indicated how February’s weather restrained activity.
Stocks stalled out as Wednesday’s batch of disappointing economic reports was capped off the Federal Reserve’s Beige Book, which issued a
concurring opinion as to the impact of February’s “unusually severe weather”. The disappointing Non-Manufacturing ISM Report on Business, from the Institute for Supply Management declined to 51.6 percent from January’s 54.0 percent. (A reading above 50 percent indicates expansion.) The ISM report went beyond blaming the weather, with this remark:
Some of the respondents attribute this to weather conditions. Overall respondents’ comments reflect cautiousness regarding business conditions and the economy.
The February ADP National Employment Report indicated that private sector payrolls increased by 139,000 in February, falling short of expectations for 150,000 new private sector jobs. Once again, we heard about the influence of the weather. Mark Zandi, chief economist for Moody’s Analytics, finished his commentary with this statement:
Bad winter weather, especially in mid-month, weighed on payrolls. Job growth is expected to improve with warmer temperatures.
Although many investors consider the ADP National Employment Report as a signal for what to expect in the monthly non-farm payrolls report from the Bureau of Labor Statistics, there is no reliable correlation between the two. Beyond that, the BLS report includes public sector payrolls, while the ADP report is focused solely on the private sector. ADP: Sluggish Growth from Private Payrolls in February
The Dow Jones Industrial Average (DIA) lost 35 points to finish Wednesday’s trading session at 16,360 for a 0.22 percent decline. The S&P 500 (SPY) took a microscopic dip to 1,873.81 from Tuesday’s record-high close at 1,873.91.
The Nasdaq 100 (QQQ) advanced 0.20 percent to finish at 3,727. The Russell 2000 (IWM) declined 0.23 percent to 1,205.
In other major markets, oil (USO) sank 2.21 percent to close at $36.24. Bearish Wick in Coffee Forming This Week?
On London’s ICE Futures Europe Exchange, April futures for Brent crude oil declined $1.62 (1.49 percent) to $107.24/bbl. (BNO).
April gold futures declined 90 cents (0.07 percent) to $1,337.00 per ounce (GLD).
The transportation sector rose above the clouds during Wednesday’s trading session, as the Dow Jones Transportation Average climbed 0.32 percent to 7,489 (IYT).
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Japanese stocks soared as the yen weakened to 102.28 per dollar during Wednesday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average jumped 1.20 percent to 14,897 (EWJ).
In China, stocks retreated after the People’s Bank of China continued to drain excess cash from the money market. The seven-day repo rate climbed to 3.81 percent. The nation’s central bank is also allowing the first corporate bond default since it first began regulating the debt market in 1997. Shanghai Chaori Solar Energy is not expected to make its $14 million interest payment on Thursday. The PBOC is taking the wise course of letting the company default, rather than the bailout route, which creates a “moral hazard” milieu and encourages financial recklessness by others.
The Shanghai Composite Index dropped 0.89 percent to 2,053 (FXI). Hong Kong’s Hang Seng Index declined 0.34 percent to 22,579 (NYSEARCA:EWH).
In Europe, stocks remained unchanged, despite a better-than-expected final Markit Eurozone Composite PMI for February, which rose to its highest level in 32 months: 53.3. Investors feared that the strong reading would discourage the European Central Bank from cutting interest rates, as suggested by the International Monetary Fund. The Euro STOXX 50 Index finished Wednesday’s session with a 0.01 percent dip to 3,135 – remaining above its 50-day moving average of 3,090. Its Relative Strength Index is 55.59 (FEZ).
Technical indicators revealed that the S&P 500 remained above its 50-day moving average of 1,824 after Wednesday’s trading session brought a microscopic dip to 1,873.81 from Tuesday’s record-high close at 1,873.91. Its Relative Strength Index (RSI) slipped from 65.36 to 65.31. The MACD and the signal line are both climbing above the zero line, suggesting that the S&P could resume its advance during the immediate future.
On Wednesday, five sectors advanced and four sectors declined. The energy sector took the hardest hit, falling 0.93 percent.
Consumer Discretionary (XLY): +0.42%
Technology: (XLK): +0.14%
Industrials (XLI): +0.13%
Materials: (XLB): +0.23%
Energy (XLE): -0.93%
Financials: (XLF): +1.05%
Utilities (XLU): -0.67%
Health Care: (XLV): -0.25%
Consumer Staples (XLP): -0.33%
Bottom line: Stock’s remained stuck in February’s snow on Wednesday as a batch of disappointing economic reports blamed the weather for the downbeat results.
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