Markets: It was an flat-to-down week for the market, with 3 out of 4 indexes posting losses, and the S&P flat. It was an “Earnings vs. Higher Rates” showdown, and rate fears appear to have won this week. The Fed funds futures market shows a nearly 50% chance that the Fed will also raise its rate in December, for a total of 4 rate hikes in 2018. This is up from 33% a month ago.
“The bond market had to absorb combined sales of $96 billion in coupon-bearing Treasuries this week, as the Treasury ramped up its borrowing following last year’s massive tax overhaul and a two-year budget agreement reached in February.
Inflation worries are also mounting as oil and commodity prices have been rising in recent weeks. Investors are concerned that U.S. inflation, long subdued since the financial crisis a decade ago, could gain momentum, since the Tax cuts passed in December 2017 could stimulate an economy already near or at full employment.”
The yield on the 10-year Treasury note hit 3% on Tuesday morning for the first time since 2014. The benchmark yield helps set lending rates for auto loans, mortgages and other loans. Wall Street investors are concerned that higher interest rates may eat into corporate profits and signal inflation is coming. That could ultimately hurt the economy.
Investors also worry that the Republican tax cuts for businesses and individuals will cause the economy to grow too quickly.” (Source:CNN)
Dividend Stocks Update: These high dividend stocks go ex-dividend this coming week: Genesis Energy LP (NYSE:GEL), CEMIG - Companhia Energetica Minas Gerais ADR (NYSE:CIG), Tsakos Energy Navigation Ltd (NYSE:TNP).
Volatility: The VIX fell -8.7% this week, ending the week at $15.47.
Currency: The USD rose vs. most major currencies again this week, spurred on by increased rate hike fears. It hit a 3-month high on Friday, and remained on track for its best weekly gain in 11 weeks.
Market Breadth: 15 of the DOW 30 stocks rose this week, vs. 19 last week. 57% of the S&P 500 rose this week, vs. 65% last week.
Economic News: “Sales of previously-owned U.S. homes grew in March for the second consecutive month. Existing-home sales increased 1.1% in March from the previous month to a seasonally annual rate of 5.60 million, but declined 1.2% vs. 1 year earlier.” (Source: WSJ.com)
“Sales of new U.S. single-family homes increased more than expected in March as sales in the West surged to their highest level in more than 11 years. The Commerce Department said on Tuesday new home sales increased 4.0 percent to a seasonally adjusted annual rate of 694,000 units last month. February’s sales pace was revised up to 667,000 units from the previously reported 618,000 units. New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They jumped 8.8 percent from a year ago.”
US GDP rose 2.3% in Q1 ’18, vs. 2.9% in Q4 ’17.
Week Ahead Highlights: Q1 ’18 earnings season rolls on, with DOW components Apple (NASDAQ:AAPL), McDonald’s Corporation (NYSE:MCD), Merck (NYSE:MRK) and Pfizer (NYSE:PFE) all reporting. 27% of the S&P 500 will report next week.
Next Week’s US Economic Reports: The April Non-Farm Payrolls Report and Unemployment figure is due out next Friday am. The ADP Employment report will come out on Wed. am. The ADP report has a very mixed record of predicting Non-Farm Payroll Report outcomes.
Sectors: The Utilities and Real Estate sectors led this week, as Industrials trailed.
Futures:
Crude Oil WTI Futures fell .57% this week, while Natural Gas futures rose 1.13%.
