Equities rose moderately strong this week on M&A activity, expectations that the Fed will keep interest rates low for quite some time, and on belief that much of the weakness in economic data is weather related and temporary. Gains also came despite worries about political discord in Ukraine. A surprise hike in Home Sales also propelled stocks to all-time highs. Retailers helped the markets as earnings showed better than expected numbers albeit on lowered guidance. Fed Chair Yellen’s delayed testimony to the Senate put a bid in stocks as she confirmed continuing accommodative monetary policy. The S&P 500 Index (SPX) rose 1.3% while the Dow Jones Industrial Average ($DJI) finished up 1.5% for the week. The tech-heavy Nasdaq (NDX) rose 1% and the market-leading small caps (RUT) led all the major indices by posting a gain of 1.6%.
Volatility fell this past week but only slightly as markets are still concerned that the weather and geopolitical risks may have a negative impact. The CBOE Volatility Index (VIX) fell over 4% for the week. The S&P 500 Index (SPX) looked to have formed a topping level near $1850 recently but the Bulls were finally able to get a settlement above it at the end of the week. A major catalyst may be the only thing that breaks stocks at this point as the markets continue to ignore slowing growth and mediocre earnings. Last Thursday’s GDP number showed lower than expected growth in the economy but stocks still rallied.
Treasury yields generally were down moderately for the week. After little change on Monday, rates eased somewhat Tuesday on weaker-than-expected consumer confidence. Also, investors possibly sought to cover short positions ahead of this past week’s auctions. The 2, 5 and 7-year auctions had strong demand but stocks still moved higher in conjunction with Treasuries. Natural Gas futures (/NG) broke their recent bullish trend as speculators took profits. It fell a startling 26% this past week despite the continued cold weather over much of the country.
There is quite a bit of economic data on the calendar this week. The consumer and manufacturing sectors are in the spotlight. After two disappointing employment situations, Friday’s employment report will get extra attention from investors. Also, motor vehicle sales have stalled along with personal income, both of which have updates posted on Monday. Core durables orders last week showed signs of life for January and we get data for February manufacturing from PMI and ISM this week. Earnings season is all about wrapped up but reports from a few retailers including Costco (COST) are due.
