NDS Weekly Commentary(3/12/18) – Markets Push Higher … Wage Growth Slows

March 12, 2018

Stocks pushed nicely higher last week as the Labor Department reported that the economy added 313,000 jobs during the month of February (well ahead of estimates of 200,000). Unemployment remained unchanged at 4.1% for the fifth straight month. The report eased investors’ concerns that inflation was accelerating too quickly as year-over-year wage growth in February was 2.6% (less than January’s rate of 2.9%). Also tempering investors’ concerns was the fact that steel and aluminum tariffs imposed by the government were not as restrictive as originally thought (Canada and Mexico are excluded, for now). The synchronized global recovery continues.

For the week, the DJIA gained 3.34% while the S&P 500 finished higher by 3.59%. Developed international markets also pushed ahead as the MSCI EAFE index closed up 1.88% for the week. Emerging markets added-on 2.18% for the week. Despite the ‘correction’ experienced in early February, the DJIA is up 3.0% for the year-to-date period while the S&P 500 is higher by 4.6% for the same period. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week relatively flat. As a result, the 10 YR US Treasury closed at a yield of 2.90% (up 4 bp from the previous week’s closing yield of 2.86%). Gold prices inched higher by $1.30 to close at $1,322.40/oz. Oil prices were relatively flat last week as oil closed at $62.05/bbl.

The week ahead has a number of economic releases – CPI/PPI, Retail Sales, NY/Philly Fed manufacturing surveys, Import prices, Housing starts, Industrial production and Preliminary Feb. consumer sentiment. Fourth-quarter earnings reports will continue as we expect earnings to be relatively positive versus expectations. Friday could prove to be a volatile day as ‘quadruple witching’ takes place where market index futures contracts, market index options contracts, stock options contracts and stock futures contracts all expire. Quadruple witching typically results in increased volatility. Fortunately this only happens 4 times per year – on the third Friday of March, June, September and December.

As always, we plan to look through the day-to-day news and focus on longer-term objectives. Investors should stay the course and stick close to their long-term asset allocation targets.

Don’t forget to watch March Madness … a nice diversion from the day-to-day noise of the markets and headline news!

“The only difference between a good shot and bad shot is if it goes in or not.”Charles Barkley