The S&P 500 Indices posted its fifth consecutive week of gains

BY  | FROM  | 2016-03-21 15:12

“Give me one moment in time,” was the tune on Wall Street, as for a few brief minutes on Thursday afternoon the market traded above 2,044, placing it in the positive year-to-date category for the first time this year (in retrospect that should have been the Q1 objective).  However, it missed the mark for the close, closing off 0.16%, cancelling the celebration.  However, the market was not about to sing the Blues over the miss, as it changed the words on Friday to “I did it my way,” as it posted its fifth consecutive week of gains, an occasion that called for at least a few Fifths to be opened (at the cost of those blessed corporate cards – such a wonderful invention). 

For the week, the market took the Grammy, as it didn’t close Short (a group that was “flying high in February,” but “shot down in March”). Of course, the normal celebrators were there for the occasion, as they came out not so much to bury the opening six weeks of declines (-10.51% through February 11), which some now appeared to have deleted from their memory, but to praise the rebirth (up 12.05%) and start 2016 anew, from a plus 0.28% gain start.  Ah, perhaps they should switch their view from Julius Caesar (written in 1599) ahead to Hamlet (1603) - “there are more things in heaven and earth (the market, central banks, trade, oil politics), Horatio, than are dreamt of in your philosophy.” 

But who wants to be a party-pooper, or as a few biotech owners this week called them - margin calls. Of course, no week would be complete without its dose of U.S. politics, which this week trumped both front runners further ahead in their quest to “reach the unreachable star,” as it appeared to bring others together to sing (or squash) the “impossible dream.”  The bottom-line is Super Tuesdays will continue on, and when some outcome starts to come into focus (along with the betting line), the Street will vote via a reallocation, with energy, trade-related issues, and the too-big-to-fail stocks being rearranged (with short sellers saying they are rearranging the chairs on the Titanic).

In M&A, hotels and gaming facilities owner Starwood Hotels & Resorts Worldwide (HOT; up 14.4% for the week), which had an offer from competitor Marriott International (MAR; up 6.2% for the week) for USD 12.2 billion to create the world’s largest hotel chain, received a counter-bid from Chinese Anbang Insurance Group for USD 13.2 billion cash, with Starwood terminating its deal with Marriott. The question now was - does Marriott want to get into a bidding war?  Grocery chain Fresh Market (TFM; up 24.1% for the week) said it would be acquired by private equity firm Apollo for USD 1.3 billion.  The London Stock Exchange and Deutsche B?rse said they would merge via an all-share USD 30 billion deal.  Canadian energy infrastructure issue TransCanada (TRP; up 4.7% for the week) said it would acquire Columbia Pipeline (CPGX; up 8.2% for the week) for USD 10.2 billion; the companies were known to be in talks. In economic news, the Bank of Japan left its rates unchanged, as expected, at negative 0.1%, as it downgraded its view of the economy. 

Norway's central bank reduced its interest rate to 0.50% from the previous 0.75% and noted the possibility of negative rates.  Japanese exports declined 4.0% in February (year-over-year), which was a considerable improvement from January’s 12.9% decline; imports decreased 14.2%. In the U.S., the February PPI came in at -0.2%, as expected, and the year-over-year rate was flat, as the PPI ex-food and energy came in flat (when a 0.1% gain was expected), with the year-over-year rate up 1.2%.  February Retail Sales came in at -0.1%, as expected, and the report ex-auto sales also posted a -0.1%, when a deeper 0.2% decline was expected, but January was restated down to negative -0.4% from the originally reported 0.2% (which upset the market).  The February CPI report came in at 1.0% year-over-year, as the CPI ex-food and energy posted a 0.3% gain, as expected, with a Fed-pleasing 2.3% year-over-year gain.  February Housing Starts posted a 7.2% increase over January (when a 4.3% gain was expected), as Permits decreased 2.9% (when they were expected to be flat).  The February Leading Indicators report came in with a 0.1% gain, when a higher 0.2% gain was expected.  The highlight for the week was Wednesday’s FOMC forecast release and news conference. 

The highlight stat was that the Fed saw interest rates reaching up 0.50% by the end of the year, implying two increases of 0.25% each.  The Fed saw the economy improving, with employment stronger but investment still weak, as it expected inflation to remain low but increase.  The market liked the statement and the continuance of low interest rates, and it moved up; financials, however, declined, as low interest rates would continue to put pressure on its margins. 

The January JOLTS report came in with 5.541 million jobs currently opened, waiting to be filled; this was up from last month’s new downwardly revised 5.28 million (originally released at 5.607 million).  The report was seen as positive for employment.  In issues, Valeant Pharmaceuticals (VRX) reduced its guidance on Tuesday, as the issue closed off 51.5%, on 13 times its average trading volume that day, and it closed the week off 61.2%.  The decline pushed down pharmaceutical issues, as Endo International (ENDP) closed the week off 29.6%, and Mallinckrodt (MNK) closed the week off 20.8%. In layoffs, S&P MidCap personal products maker Avon Products (AVP; up 14.0% for the week) said it would reduce its workforce by 2,500 employees (approximately 8%) and move its corporate headquarters to the U.K. from the U.S. 

Of note, oil was under pressure from its recent gains, as concern increased over supply and an April 17, 2016, meeting of Gulf OPEC members appeared to take hold, which Iran was not expected to attend.  Oil moved up later in the week and continued up after the FOMC meeting, breaking above USD 40, to close the week at USD 40.34, up 4.8% for the week. U.S. political primary results advanced both front runners Mr. Trump (Republican) and Mrs. Clinton (Democrat); the state-by-state process will continue next week (Arizona and Utah).  At this point, the market has not reacted to the elections, but it is expected to develop as we get further into the primary season.  The market posted its fifth week of gains, all of which were over 1%, as this week’s Fed-inspired gains pushed the market into positive territory for the year-to-date for the first time this year.  The market closed at 2,049.58, up 1.35% for the week and up 0.28% from its 2015 close of 2,043.94. 

The market had declined 10.51% (to 1,829.08) year-to-date on February 11, 2016, but it has now moved up 12.06% from that low, giving hope for a profitable 2016.  It was another positive week for the market, as breadth stayed positive, with a little help from the Fed.  For the week, 380 issues gained, up from last week’s 354 and down from the prior week’s one-sided 459 issues.  Decliners decreased a tick to 119 issues, down from last week’s 149 issues and the prior week’s 74.  Six issues gained at least 10% (five did last week) and 44 others were up at least 5% (29 were last week).  Three issues declined at least 10% (two did so last week), and another 6 issues lost at least 5% (24 did so in the prior week).  Year-to-date, breadth turned positive, with 295 issues up, which was up from the 301 that were positive year-to-date last week, with 114 up at least 10% (83 were last week), compared with 208 down issues, down from last week’s 201, with 70 of them off at least 10% (down from the 84 count last week). Nine of the ten sectors gained, breaking the three weeks during which all 10 sectors posted gains.  Health care was the sole decliner, falling 2.04% for the week (helped by Friday’s 1.33% rebound), as Valeant Pharmaceuticals restarted the biotech concerns. 

The sector is off 7.05% year-to-date, the worst of any sector, in a year when it was expected to do well due to expanded insurance coverage.  Energy posted a 2.48% gain, as oil moved up in the second half of the week and is up 5.56% year-to-date, but it is still off 19.30% from the end of 2014. Industrials did the best, up 3.41%, as it is up 4.53% year-to-date. Utilities were up 1.73%, as it is up 12.38% year-to-date. Telecommunication services added 0.84% and is the best-performing sector year-to-date, up 13.32%.  Information technology posted a 2.33% gain, helped by Apple’s (AAPL) 3.6% gain (up 0.6% year-to-date), and the sector entered the positive column year-to-date, with a 0.36% gain.  Trading volume decreased 11% after last week’s double-digit decline, and it was now on par with the average last year. 

Measurable volatility (the high-over-low price variance) noticeably decreased to 2.36% from last week’s 2.70% and the prior week’s 4.00%.  The week posted no 1% moves, compared to one last week (down), and two the week before (one up and one down).  The VIX declined to its 2016 low, as it ended the week at 14.02 (lowest since August 2015), down from last week’s 16.50 (and the prior week’s 16.86).  Interest rates moved down for the week, as the 10-year U.S. Treasury closed at 1.88%, up from last week’s 1.98% (and the prior week’s 1.88%). 

The 30-year U.S. Treasury closed at 2.68%, a tick up from last week’s 2.76% (and 2.70% the week before that).  Oil continued upward, as it passed the USD 40 level, but closed under it, at 39.35, up from last week’s USD 38.49 and the prior week’s USD 36.33 (and USD 32.84 the week before that).  Gold moved up, closing at USD 1,256.00, up from last week’s 1,251.10 (and the prior week’s USD 1,260.10). 

The euro closed up, at 1.1270, down from last week’s level, 1.1151 (it closed the prior week at 1.1006).  The pound moved up to close at 144.76 from last week’s 1.4282 and the prior week’s 1.4232.  The yen (quoted in yen-to-U.S. dollars, so higher is weaker) closed at 111.56, down from last week’s 113.84 (and 120.30 at year-end 2015).  The yuan closed at 6.4716, down from last week’s 6.4961 (and the prior week’s 6.5027).  The Nikkei was down 1.26% for the week (down 0.45% last week) and off 12.13% year-to-date.  The Shanghai was up 5.15% for the week (up 2.22% last week) and off 16.50% year-to-date.  The market will push five days into four next week, as equity markets are closed next Friday (for Good Friday), but banks remain open.  Background reports will focus on housing, as Friday’s final GDP report will be issued when the market is closed.  Earnings releases will remain slow, as company guidance will get the attention.  Oil is expected to remain the topic of discussion, as trading centers on fundamentals, absent any events.

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