Stocks Close Week on Up Note
The U.S. equity markets closed the trading session higher to end the week, but well off the best levels of the day as investors weighed domestic reports that showed personal income and personal spending rose inline with expectations. Plus, consumer sentiment was revised slightly higher, but came in below most street estimates. Treasuries were mostly lower following the economic data. Crude oil prices and gold were higher, while the U.S. dollar was nearly unchanged.
The Dow Jones Industrial Average increased 59 points (0.4%) to 16,323
The S&P 500 Index gained 9 points (0.5%) to 1,858
The Nasdaq Composite was 5 points (0.1%) higher at 4,156
In moderate volume, 639 million shares were traded on the NYSE, and 2.0 billion shares changed hands on the Nasdaq
WTI crude oil increased $0.39 to $101.67 per barrel, wholesale gasoline was unchanged at $2.94 per gallon
The Bloomberg gold spot price increased $1.33 to $1,292.64 per ounce
Markets were mixed on the week, as the DJIA increased 0.1%, the S&P 500 Index decreased 0.5%, and the Nasdaq Composite Index dropped 2.8%
Consumer sentiment revised slightly higher, while personal spending meets forecasts
The final University of Michigan Consumer Sentiment Index was revised slightly higher to 80.0 for March, from the preliminary report of 79.9, and compared to the 80.5 revision that economists surveyed by Bloomberg had estimated. February’s figure was 81.6 and this month’s level was the lowest since November. The smaller-than-expected upward revision came as a modest improvement for the economic outlook component of the survey was accompanied by a decline in the economic conditions portion.
On inflation, the 1-year expectation remained at 3.2%, matching February’s figure, while the 5-year inflation outlook was also unadjusted at 2.9%, inline with the expectation in the previous month
Personal income rose 0.3% month-over-month in February, matching the gain that economists surveyed by Bloomberg had projected, and January’s 0.3% rise was unrevised. Personal spending increased 0.3% m/m in February, inline with expectations, while January’s 0.4% gain was revised to a 0.2% increase. The February savings rate as a percentage of disposable income ticked higher to 4.3%, from January’s downwardly revised 4.2% rate.
Pent up demand is one aspect of the severe weather that seems to be at least slightly overlooked by most traders and investors. Of course, not all purchases that were put off will be made up for, but many believe that a great majority of them will be. This may potentially help GDP in the 2nd quarter of 2014. Plus, a relatively small but perhaps important development we believe we’ll see as the weather thaws is stronger-than-expected demand for “warm weather” related products and services as much of the country ventures outside for the first time in 6 months. The disgust factor with the tough winter seems to be quite high, and we believe there’s a decent chance that consumers will be looking for things to move quickly away from the memories of seemingly unending snow and cold. This can only continue to bolster local economies.
Treasuries were mostly lower, with the yield on the 2-year note nearly unchanged at 0.45%, while the yield on the 10-year note rose 4 basis points (bps) to 2.72% and the 30-year bond rate increased 2 bps to 3.55%.
Europe and Asia
The European equity markets finished higher, with sentiment being supported by growing optimism that China may deliver more stimulus measures to meet its 7.5% economic growth target. Meanwhile, the festering Ukrainian tensions with Russia garnered some attention ahead of the weekend. The European economic calendar delivered some mixed data, with Spain’s retail sales declining last month and French consumer spending unexpectedly decreasing in February, while U.K. 4Q GDP was unrevised at a 0.7% quarter-over-quarter pace of expansion and Eurozone economic confidence improved more than anticipated for March.
Stocks in Asia finished mostly higher, aided by increased optimism that the Chinese government will deploy further stimulus measures after a media report said China’s Premier Li was confident of keeping economic growth in a “reasonable range,” per Bloomberg. China has stood by its 7.5% economic growth target, despite recent data showing economic growth is slowing. Japan released reports that showed the nation’s consumer prices rose in February and retail sales for last month unexpectedly increased, more than offsetting a separate release showing household spending surprisingly fell for the month. Lastly, South Korea revealed a disappointing report on the nation’s industrial output for February.