Monthly Archives: February 2016

Market Insights 2/29/9016

Stocks Lose Steam

The early gains in U.S. equities dissipated as quickly as they occurred, with stocks closing at their lows, as another tumble in China and disappointing reads on the economic front overshadowed support from commodity-related issues amid a rise crude oil price and further stimulus measures from China. Treasuries were mostly higher, gold saw a nice gain, while the U.S. dollar was flat.

The Markets…

The Dow Jones Industrial Average declined 124 points (0.7%) to 16,516

The S&P 500 Index was 16 points (0.8%) lower at 1,932

The Nasdaq Composite lost 36 points (0.7%) to 4,558

In heavy volume, 1.3 billion shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil rose $0.97 to $33.75 per barrel, wholesale gasoline increased $0.02 to $1.32 per gallon

The Bloomberg gold spot price gained $16.44 to $1,239.90 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 98.17

Regional manufacturing and pending home sales reports miss forecasts

Pending home sales declined 2.5% month-over-month in January, versus the Bloomberg projection of a 0.5% rise and following the upwardly revised 0.9% gain registered in December. Compared to last year, sales were 0.9% lower, versus forecasts of a 3.8% rise. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which unexpectedly rose in January.

The Chicago Purchasing Managers Index fell back into contraction territory (below 50), dropping to 47.6 in February from 55.6 in January, and versus expectations of a decrease to 52.5. The index has been in contraction territory for three of the last four months, as production and new orders posted “significant declines,” while employment hit the lowest since November 2009.

The Dallas Fed Manufacturing Index improved to -31.8 for February from January’s unrevised -34.6 level—which was the lowest since April 2009—with economists forecasting an improvement to -30.0. However, a reading below zero denotes contraction.

Today’s February manufacturing reports come ahead of tomorrow’s key national reads on the sector, headlined by the ISM Manufacturing Index, expected to tick higher to 48.5, from 48.2 in January, but remain in contraction territory (below 50) for the fifth-straight month. However, Markit’s Manufacturing PMI Index is projected to remain in expansion territory (above 50) after being revised slightly higher to 51.2 from the preliminary reading of 51.0, but down from January’s 52.4 level. In addition, construction spending will be reported, with economists expecting a 0.5% m/m increase for January, as well as February auto sales to be released throughout the day.

We feel at this point the leading economic indicators continue to point to a decent U.S. economic picture. Further, other indicators are not consistent with an impending recession. U.S. consumers continue to improve their financial position and represent 69% of US GDP. The low unemployment rate and continued historically low initial claims for unemployment may finally be pressuring wages higher. This should help to boost consumer spending, illustrated by a nice gain in retails sales, which doesn’t foretell a coming recession.

Treasuries were mixed, as the yield on the 2-year note ticked 1 basis point lower to 0.79%, while the yields on the 10-year note and the 30-year bond fell 3 bps to 1.73% and 2.61%, respectively.

Europe shows late-day charge to finish mostly higher, Asia lower

European equities finished mostly higher, courtesy of a late-session rally that was led by strength in the energy sector as crude oil prices gained ground. Also, stocks found some support from the announcement out of China of further stimulus measures in the form of a cut to its banking sector reserve requirement ratio. Traders digested some mixed economic data in the region, while some expressed disappointment with the lack of any concrete stimulus measures following the G-20 meeting in Shanghai over the weekend. Also, festering pressure on the financial sector hamstrung the markets, while political uncertainty in Ireland remained on the heels of its election results over the weekend. The Eurozone’s Consumer Price Index (CPI) estimate declined 0.2% y/y, after January’s 0.3% increase, and compared to the flat reading that economists had expected. In other economic news, German retail sales rose 0.7% m/m in January, after decreasing 0.2% in the month prior, and compared to the 0.3% gain that was projected. The euro traded lower versus the U.S. dollar, while bond yields in the region mostly moved to the downside.

Stocks in Asia finished mostly to the downside to begin the week, with the Chinese markets falling amid disappointment regarding the lack of an announcement of further stimulus measures over the weekend from the Chinese government and at the conclusion of the G-20 meeting in Shanghai. Also, global growth concerns remained ahead of this week’s plethora of world economic data. However, after the closing bell, the People’s Bank of China (PBoC) announced the reduction of the banking sector’s reserve requirement ratio (RRR)—the amount that banks need to keep on reserve instead of being used in the financial system—by 50 bps to 17.00%.

Japanese equities traded lower, with the yen rallying amid heightened risk aversion, while the nation posted some mixed economic data. The country’s preliminary January industrial production rose 3.7% m/m, after dropping 1.7% in December, and compared to the expected gain of 3.2%. However, Japan’s retail sales dropped 1.1% m/m last month, on the heels of December’s 0.2% decline, and versus the forecasted 0.1% increase. Stocks in India decreased as traders digested the nation’s key annual budget, with some expressing disappointment regarding the tax proposals of the report, per Bloomberg. Meantime, markets in Australia finished flat, while South Korean securities were lower.

Tomorrow’s international economic calendar will offer the Markit Manufacturing PMI Index from China and Japan, while the island nation will also report personal income, and employment data, South Korea’s trade balance, and building approvals from Australia. From across the pond will come trade data, the Ifo Business Climate Index and GDP from Germany, while France will report confidence figures.

Market Insights 2/26/2016

Stocks Temper Weekly Gains

U.S. stocks finished mixed, unable to hold on to early gains that arose amid a broad based advance for global equities and an upbeat revision to domestic 4Q GDP, though inflation figures were hotter than expected. Treasuries and gold were lower and the U.S. dollar gained ground, while crude oil prices spiked higher in morning action only to reverse course and close lower.

The Markets….

The Dow Jones Industrial Average declined 57 points (0.3%) to 16,640

The S&P 500 Index was 4 points (0.2%) lower at 1,948

The Nasdaq Composite gained 8 points (0.2%) to 4,590

In heavy volume, 1.0 billion shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil declined $0.29 to $32.78 per barrel, wholesale gasoline decreased $0.01 to $1.30 per gallon

The Bloomberg gold spot price lost $9.64 to $1,223.27 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.8% higher at 98.08

Markets were higher for the week, as the DJIA increased 1.5%, the S&P 500 Index added 1.6%, and the Nasdaq Composite Index gained 1.9%

First revision to Q4 GDP stronger than expected to headline upbeat economic calendar

The second look (of three) at Q4 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 1.0%, revised upward from the 0.7% expansion reported in the first report. This compared to the Bloomberg forecast of a revised 0.4% pace of growth. 3Q GDP expanded by an unrevised 2.0% rate. Personal consumption came in at a 2.0% gain for 4Q, from the 2.2% increase previously reported, with expectations calling for an unrevised rise. Personal consumption grew by an unrevised 3.0% in 3Q.

The upward revision came as a positive change to private inventory investment and a downward revision to imports more than offset the negative adjustment to personal consumption and a downward revision to state and local government spending.

On inflation, the GDP Price Index was revised to a 0.9% gain, versus forecasts of an unrevised 0.8% increase, while the core PCE Index, which excludes food and energy, was adjusted to a 1.3% rise, versus expectations of an unrevised 1.2% increase.

Personal income was 0.5% higher month-over-month in January, versus forecasts of a 0.4% gain, while December’s 0.3% increase was unrevised. Personal spending came in 0.5% higher m/m last month, versus expectations of a 0.3% rise, while December’s flat reading was adjusted to a 0.1% gain. The January savings rate as a percentage of disposable income remained at December’s downwardly revised 5.2% rate. The PCE Deflator ticked 0.1% higher m/m, compared to the forecasted flat reading. Compared to last year, the deflator was 1.3% higher, above forecasts of a 1.1% gain. Excluding food and energy, the PCE Core Index was 0.3% higher, compared to expectations of a 0.2% increase, and the index was 1.7% higher y/y, topping estimates of a 1.5% gain.

The final February University of Michigan Consumer Sentiment Index was revised to 91.7 from the preliminary level of 90.7, and compared to expectations of 91.0, with upward adjustments for the current conditions and outlook components of the report. However, the index was lower compared to January’s level of 92.0. The 1-year inflation projection was unrevised at January’s level of 2.5%, while the 5-10 year inflation outlook was revised higher to 2.5% but was down from 2.7% in January.

Treasuries were lower in afternoon action, with the yield on the 2-year note jumping 8 basis points (bps) to 0.81%, the yield on the 10-year note advancing 5 bps to 1.76%, and the 30-year bond rate gaining 5 bps to 2.64%.

Europe and Asia mostly higher to close out the week

European equities finished higher for a second-straight session, posting a second week of gains, on the heels of the favorable U.S. economic data, headlined by a stronger-than-expected 4Q GDP report. Commodity-related issues led the way, bolstered by extended gains for oil and lingering hopes of further global central bank stimulus measures. With the G-20 meeting of world leaders set to get under way, China’s central bank leader hinted at further actions, while cooler-than-expected French and German inflation reports likely buoyed expectations that the European Central Bank will announce further measures following next month’s meeting.

Uncertainty regarding the exit of the U.K. from the European Union (EU) remained, with the British pound lower versus the U.S. dollar after dropping sharply early in the week. The euro was lower versus the U.S. dollar and bond yields in the region finished mixed. In economic news, French 4Q GDP growth was revised higher to a 0.3% quarter-over-quarter pace, versus expectations of an unrevised gain of 0.2%, matching the growth seen in 3Q.

The U.K. FTSE 100 Index was up 1.4%, France’s CAC-40 Index and Spain’s IBEX 35 Index increased 1.6%, Germany’s DAX Index rose 2.0%, Italy’s FTSE MIB Index gained 2.2%, and Switzerland’s Swiss Market Index traded 1.1% higher.

Stocks in Asia finished mostly to the upside following the advances in the U.S. and Europe yesterday, bolstered by gains in crude oil prices. Japanese stocks posted their first back-to-back weekly gain since November, per Bloomberg, despite a flat read on consumer price inflation and as the yen overcame early losses late in the session. The yen was relatively stable for the week, after rallying recently on concerns about the decision by the Bank of Japan (BoJ) to adopt a negative interest rate policy (NIRP).

Mainland Chinese equities rebounded from yesterday’s tumble on a flare-up in liquidity concerns, which added to festering growth worries for the world’s second largest economy that have been exacerbated by the recent weakness in the yuan. Stocks trading in Hong Kong also rebounded from Thursday’s drop, aided by comments from the People’s Bank of China (PBoC) Governor who noted while world finance chiefs and central bankers gathered in Shanghai for the G-20 meeting that China still has some “monetary policy space” and “multiple policy instruments to address possible downside risks,” per Bloomberg.

Company Specific News

Kraft Heinz Co. reported Q4 earnings-per-share ex-items of $0.62, above the $0.58 FactSet estimate, as revenues declined 5.0% year-over-year to $7.1 billion, compared to the expected $7.0 billion. KHC said cost savings and favorable pricing net of commodity costs were partially offset by unfavorable volume/mix. Looking ahead, the company said it believes it is positioned for a strong performance in 2016 and beyond.

Gap Inc. issued much softer-than-expected EPS guidance for this year after posting roughly in line 4Q results, including its previously announced drop in same-store sales. GPS also announced a new $1.0 billion share repurchase program.

J.C. Penney Co. Inc. is rallying after posting Q4 adjusted profits of $0.39 per share, versus forecasts of $0.22, with revenues increasing 2.6% y/y to $4.0 billion, mostly in line with expectations. Same-store sales grew 4.1% y/y, versus the expected 4.0% rise. The company said it continues to win market share in a competitive environment. JCP issued stronger-than-expected full-year EPS guidance and projected same-store sales growth of 3-4%.

Monster Beverage Corp. posted Q4 profits of $0.67 per share, versus the expected $0.82, though the results included a plethora of special items that may be affecting comparability. Revenues rose 6.6% y/y to $645 million, versus the forecasted $700 million. MNST also boosted its share repurchase program by an amount that could reach $1.75 billion.

Foot Locker Inc. reported Q4 EPS ex-items of $1.16, compared to the expected $1.12, with revenue growth of 5.0% y/y to $2.0 billion, roughly in line with expectations. Same-store sales grew 7.9% y/y, versus estimates of a 5.9% gain. FL is losing solid ground, giving up early gains during its analyst conference call, where it issued 2016 same-store sales guidance that was roughly in line with forecasts.

Market Insights 2/25/2016

Stocks Finish Higher

U.S. equities finished nicely higher after initially struggling to hold on to early session gains, which transpired on the heels of a sharp rebound in durable goods orders, as a sharp rise in crude oil prices seemingly aided the advance. Treasuries and gold were higher, while the U.S. dollar was flat.

The Markets…

The Dow Jones Industrial Average rose 212 points (1.3%) to 16,697

The S&P 500 Index added 22 points (1.1%) to 1,952

The Nasdaq Composite gained 40 points (0.9%) to 4,582

In moderately-heavy volume, 951 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil rose $0.92 to $33.07 per barrel and wholesale gasoline gained $0.03 to $1.31 per gallon

The Bloomberg gold spot price increased $4.84 to $1,233.59 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 97.37

Durable goods orders rebound sharply, jobless claims rise more than expected

Durable goods orders surged 4.9% month-over-month (m/m) in January, compared to Bloomberg’s estimate of a 2.9% gain and December’s upwardly revised 4.6% drop. Ex-transportation, orders rose 1.8% m/m, versus the 0.3% forecasted rise, and December’s favorably revised 0.7% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, jumped 3.9%, compared to projections of a 1.0% increase, and following the upwardly revised 3.7% decline in the month prior.

Growth in demand for goods meant to last at least three years was led by surges in aircraft and parts. However, stripping out these volatile components, growth was broad-based, including orders for motor vehicles, machinery, computers, and communication equipment, along with electrical equipment and appliances. Today’s report is welcomed given the recessionary signals as of late from the manufacturing sector, notably the largest gain in the component pertaining to business spending since June 2014.

Weekly initial jobless claims grew by 10,000 to 272,000 last week, versus estimates of 270,000 and the prior week’s unrevised 262,000. The four-week moving average declined by 1,250 to 272,000, while continuing claims dropped by 19,000 to 2,253,000, in line with forecasts.

The Kansas City Fed Manufacturing Activity Index for February fell to -12 from January’s -9 level, versus forecasts of an improvement to -6, with a reading south of zero depicting contraction.

Treasuries were higher, with the yield on the 2-year note declining 3 basis points to 0.72%, the yield on the 10-year note dropping 4 bps to 1.71%, and the 30-year bond rate losing 2 bps to 2.58%.

Tomorrow, the U.S. economic calendar will bring the second look (of three) at 4Q Gross Domestic Product (GDP), projected to show growth at an annualized 0.4% quarter-over-quarter pace, a decrease from the initial read of 0.7% and after registering 2.0% in Q3. Shortly after the opening bell, we will also receive the final University of Michigan Consumer Sentiment Index for February, expected to inch higher to 91.0 from the preliminary read of 90.7.

Europe rebounds on a bank jump, Asia mixed in face of a tumble in China

European equities traded nicely higher after seeing pressure the past couple sessions, with oil & gas issues holding onto gains despite the turn lower for crude oil prices. In economic news, U.K. 4Q GDP growth was unrevised at a 0.5% quarter-over-quarter pace, matching forecasts, while eurozone consumer price inflation rose at a y/y level just shy of expectations for January. The British pound ticked higher after its recent tumble versus the U.S. dollar that came courtesy of increased uncertainty regarding a U.K. exit from the European Union. The euro was modestly higher versus the U.S. dollar and bond yields in the region were mostly lower.

Stocks in Asia finished mixed on the heels of yesterday upside reversal in the U.S. as crude oil prices turned higher, and ahead of the G-20 meeting tomorrow in Shanghai, while Chinese markets dropped sharply. China’s Shanghai Composite Index tumbled 6.4% as signs of tighter liquidity conditions added to festering Chinese growth concerns, which have been exacerbated by the recent weakness in the yuan.

An advance for Japanese equities was aided by a pullback in the yen, which has rallied recently amid concerns about the decision by the Bank of Japan (BoJ) to adopt a negative interest rate policy (NIRP). Australian securities ticked higher, led by strength in technology issues and South Korean listings also finished to the upside. Indian stocks decreased in volatile trading as derivatives contracts were set to expire, while the nation unveiled its railway budget, ahead of next week’s key federal budget.

The international economic docket for tomorrow will deliver a plethora of reports, beginning with the CPI from Japan and property prices from China. Releases from across the pond will include consumer confidence from the U.K. and the Eurozone, CPI from Germany, consumer spending, CPI, PPI and GDP from France and hourly wages from Italy.

Market Insights 2/24/2016

Stocks Bounce Off Lows

After beginning the day entrenched in negative territory, courtesy of disappointing reads on housing and services sector activity, U.S. equities snapped back to finish the session in the green.

Crude oil rebounded slightly following a mixed government oil inventory report, giving oil & gas and basic materials issues a boost, while earnings news was mostly positive. Treasuries were mostly lower and gold posted a nice gain, while the U.S. dollar was flat.

The Markets…

The Dow Jones Industrial Average rose 53 points (0.3%) to 16,485

The S&P 500 Index added 9 points (0.4%) to 1,930

The Nasdaq Composite gained 39 points (0.9%) to 4,543

In heavy volume, 1.0 billion shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil rose $0.28 to $32.15 per barrel and wholesale gasoline gained $0.06 to $1.28 per gallon

The Bloomberg gold spot price rose $2.55 to $1,229.40 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 97.50

New home sales fall, while preliminary services sector report suggests contraction

New home sales fell 9.2% month-over-month (m/m) in January to an annual rate of 494,000 from December’s unrevised 544,000 pace, and compared to the Bloomberg forecast of 520,000. The median home price fell 4.5% y/y at $278,800. The supply of new home inventory rose to 5.8 months at the current sales pace from 5.1 months in December as sales tumbled m/m in the West and dropped in the Midwest, more than offsetting modest gains in sales out of the Northeast and South. New home sales are based on contract signings instead of closings.

The preliminary Markit U.S. Services PMI Index in February surprisingly fell to a level depicting contraction (a reading below 50) for the first time since October 2013, falling to 49.8 from 53.2 in January, and versus forecasts of a modest rise to 53.5. Markit said East Coast snow disruption and the weakest rise in new work for 13 months acted as a brake on activity. Markit added that service providers reported the least favorable business outlook since August 2010. However, a solid rate of jobs growth was sustained in February. The release is independent and differs from the Institute for Supply Management’s (ISM) report, as it has less historic value and Markit weights its index components differently.

The MBA Mortgage Application Index declined 4.3% last week, after gaining 8.2% in the previous week. The decrease came as a 7.7% drop in the Refinance Index more than offset a 2.2% rise for the Purchase Index. The average 30-year mortgage rate increased 2 basis points to 3.85%.

Treasuries pared early gains to finish mostly lower, as the yield on the 2-year was nearly unchanged at 0.76%, while the yields on the 10-year note and the 30-year bond rose 2 basis points (bps) to 1.74% and 2.60%, respectively.

Tomorrow, the domestic economic calendar will bring the release of preliminary January durable goods orders, projected to rebound from December’s 5.0% m/m drop and grow 2.7%. Excluding transportation, orders are projected to increase 0.3%, following the prior month’s 1.0% gain. Demand for nondefense capital goods excluding aircraft are forecasted to rise 1.0%, after December’s 4.3% fall.

In our opinion, part of the reason that the correction in stocks has been so frustrating is that the economy doesn’t seem to us to be reflecting that degree of negativity. Of course we understand that stocks are a leading indicator so the risk of a more serious economic downturn is elevated. Plus, as mentioned, corporate executives and consumers looking at a declining stock market may wonder what they are missing, and decide to hold off on investments and consumption until the dust clears, further pressuring economic activity. But at this point the leading economic indicators continue to point to a decent U.S. economic picture.

As well, weekly initial jobless claims will be reported, forecasted to rise to a level of 270,000 from the prior week’s 262,000.

Europe and Asia lower on weakness in energy and commodity issues

European equities traded lower, with volatility in crude oil prices continuing to weigh on the energy sector following a mixed U.S. oil inventory report and as comments from Saudi Arabia added to talk from Iran to dampen hopes of oil production cuts. Also, basic materials stocks were some of the biggest drags on the market as disappointing economic data recently, notably today’s U.S. housing and services sector reports, buoyed global growth concerns. Financials were another weak spot as concerns regarding growing bad loans continued to hamper the sector, while uncertainty regarding a potential exit of the U.K. from the European Union exacerbated sentiment, with the British pound extending its recent tumble versus the U.S. dollar. In economic news, French consumer confidence unexpectedly declined in February, while Italy’s industrial orders’ growth slowed sharply in December. The euro was little changed versus the U.S. dollar and bond yields in the region moved mostly to the downside.

Stocks in Asia finished mostly to the downside, with the pressure on crude oil prices returning, courtesy of comments out of Saudi Arabia and Iran that dampened hopes of production cuts to try to stabilize oil prices. Also, global growth concerns continue to fester following some lackluster economic data and growing worries about the ability of central banks to spark growth, exacerbated by heightened skepticism regarding the effectiveness of some countries adopting negative interest rate policies (NIRP). Japanese equities fell for a second-straight session, with the yen adding to its recent rally to weigh on the markets, particularly automakers.

Stocks in Hong Kong’s Hang Seng Index fell as the economic growth concerns persisted in the wake of the country’s 4Q GDP report, which showed growth slowed to a 1.9% y/y pace, from the 2.2% expansion posted in 3Q, where economists had expected it to remain. Also, the extended weakness in the Chinese yuan added to the uneasiness in the region. Australia’s markets dropped on the pressure on the oil & gas and basic materials sectors, while a report showed the nation’s 4Q wage growth missed expectations, while securities traded in India finished lower, as continued cautiousness ahead of the country’s key budget announcement next week further dampened sentiment. However, mainland Chinese stocks bucked the trend, as infrastructure issues got a boost from reports of China’s Premier Li promoting urbanization in order to achieve medium-to-high-speed economic growth, per Bloomberg.

Economic reports slated for release internationally tomorrow include: consumer sentiment from South Korea, trade data from China and capital expenditures figures from Australia, while from across the pond will come consumer confidence, import prices and retail sales from Germany, GDP data from Spain and the U,K., as well as confidence numbers from Italy.

IMF says it may further cut global growth forecast

The IMF says recent market turmoil and sluggish output in rich countries may force it to further cut its global growth forecast

The world’s largest economies should agree to a coordinated increase in government spending to counter the growing risk of a deeper global economic slowdown, the International Monetary Fund said Wednesday.

The IMF said recent market turmoil and sluggish output in rich countries may force it to cut its forecast even further, a little over a month after downgrading its estimate for global growth this year to 3.4%.

“Activity softened towards the end of 2015 and the valuation of risky assets has dropped sharply, especially in advanced economies, increasing the likelihood of a further weakening of the outlook,” the fund said in a report prepared for the Group of 20 largest economies.

Crude prices will probably stay low for longer than expected, International Monetary Fund Managing Director Christine Lagarde said, urging Gulf Arab oil-producing countries to cut spending and boost revenue through new taxes.

A value-added tax that’s the same across the six-nation Gulf Cooperation Council should be adopted, Lagarde said in a speech in Abu Dhabi. The measure along with corporate income and property taxes would help raise government income, she said.

“Not only have oil prices fallen by around two-thirds from their most recent peak, but supply- and demand-side factors suggest that they are likely to stay low for an extended period,” Lagarde said. That makes it necessary for oil producers to lower reliance on crude for government income, she said.

Global oil prices have dropped 44 percent in the past year, forcing Saudi Arabia to cut spending on energy subsidies and consider selling sovereign bonds and shares in national oil company Saudi Arabian Oil Co., known as Saudi Aramco. The United Arab Emirates has also eliminated fuel subsidies.

U.S. benchmark West Texas Intermediate crude should trade in a range between $25 and $45 a barrel for the rest of the year, “although a very brief spike down towards $20 is possible,” the National Bank of Abu Dhabi PJSC said in its Global Investment Outlook 2016 report on Sunday. Prices at the lower end of the range will stimulate demand growth, it said.

Market Insights 2/22/2016

Stocks Start the Week Strong

Domestic equities rallied on Monday, adding to last week’s solid gains, as crude oil prices jumped on the heels of a report from the International Energy Agency, which noted in its medium-term outlook that U.S. shale oil production is expected to decline.

In economic news, Markit’s preliminary U.S. Manufacturing PMI Index for February declined, but remained in expansion territory.

Treasuries and gold were lower, while the U.S. dollar advanced.

The Markets…..

The Dow Jones Industrial Average rallied 229 points (1.4%) to 16,621

The S&P 500 Index advanced 28 points (1.4%) to 1,945

The Nasdaq Composite gained 66 points (1.5%) to 4,571

In moderately-heavy volume, 1.0 billion shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil increased $1.64 to $33.39 per barrel and wholesale gasoline added $0.04 to $1.25 per gallon

The Bloomberg gold spot price lost $18.72 to $1,208.09 per ounce

Preliminary manufacturing report shows growth slowed

The preliminary Markit U.S. Manufacturing PMI Index for February declined to 51.0 from January’s 52.4 level, where economists surveyed by Bloomberg had forecasted it to remain. However, a reading above 50 denotes expansion.

The correction in stocks doesn’t yet seem to be corroborated by a sharp U.S. economic downturn. In fact, recent economic data has been encouraging, but shattered confidence can lead to a self-fulfilling prophecy. In our opinion, recent economic readings from around the world also suggest that the globe is not slipping into a recession.

Treasuries were modestly lower, with the yield on the 2-year note ticking 2 basis points higher to 0.76%, while the yields on the 10-year note and the 30-year bond rose 1 bp to 1.76% and 2.61%, respectively.

Tomorrow’s U.S. economic calendar will be headlined by some reads on the housing market and a look at the psyche of the consumer. January existing home sales are projected to show the largest portion of the housing sales market declined 2.4% month-over-month to an annual rate of 5.33 million units. Also, February Consumer Confidence is expected to dip to 97.2 from 98.1 in January. Other reports slated for tomorrow include: the S&P/Case-Shiller Home Price Index and the Richmond Fed Manufacturing Index, with the former forecasted to show home prices continued to rise, and the latter estimated to show growth continued modestly.

What’s Behind the Recent Market Volatility?, recession risk is elevated, just not glaring yet. The U.S. economy remains bifurcated—manufacturing is in recession, but services are hanging in there. Market-based measures of the economy—for instance, yield spreads, the shape of the yield curve and stock market prices—are sending louder recession signals, while high-frequency economic-data-based leading indicators—like unemployment claims and some housing-based data—are not yet waving a red flag. Overall, the leading economic indicators have not rolled over to the extent typically seen before recessions.

Europe and Asia mostly higher to begin the week

European equities traded higher, with oil & gas and basic materials stocks leading the way amid rallying oil prices and as commodity issues recovered amid eased risk aversion. Stocks in the region shrugged off a disappointing read on eurozone business activity, softer-than-expected quarterly results from HSBC Holdings PLC. (HSBC $32), and heightened uncertainty regarding the U.K.’s future in the European Union (EU). Markit’s preliminary Eurozone Composite PMI Index—a gauge of business activity in both the manufacturing and services sectors—declined to 52.7 in February, from 53.6 in January, and compared to the decrease to 53.3 that economists had projected. However, a reading above 50 denotes expansion.

The British pound fell the most since 2009, per Bloomberg, including a sharp drop versus the U.S. dollar, after London Mayor Boris Johnson said he will campaign for Britain to leave the EU in a June 23rd referendum. The news comes as over the weekend Prime Minister David Cameron said he would fight to keep Britain in the EU after securing a deal on membership terms with leaders in Brussels. U.K. stocks are moving higher on the strength in basic materials issues and the drop in the pound. The euro dropped versus the U.S. dollar and bond yields in the region moved mostly to the downside.

Stocks in Asia added to the solid gains posted last week, with commodity issues gaining ground as risk aversion that has ramped up to begin the year appears to be continuing to wane, while crude oil prices moved higher. Japanese equities advanced, despite a larger-than-expected slowdown in the nation’s manufacturing growth in February, aided by some weakness in the yen. The yen has rallied recently on concerns about the late-January decision by the Bank of Japan (BoJ) to adopt a negative interest rate policy (NIRP). In our opinion, negative interest rate policy adds up to less than zero for investors, while the main economic risks of a NIRP have yet to be realized, increasingly negative interest rates may weigh more heavily on the stock market and pose a threat to the drivers of the global economy and should be watched carefully.

Mainland Chinese stocks rallied, bolstered by reports that China has replaced the head of its securities regulator, and that the government cut taxes on home transactions. Australian securities advanced amid strength in basic materials stocks, along with gains in the financial sector. Finally, equities in India ticked higher and South Korean listings finished flat in choppy trading.

Market Insights 2/19/2016

Stocks Mixed on the Day, but Higher for the Week

U.S. stocks finished the regular trading session in mixed fashion to wrap up a relatively positive week for equities across the globe. Crude oil prices were under pressure to weigh on the energy sector, while upbeat quarterly results and guidance from Applied Materials helped bolster gains for technology issues. Treasuries declined in the wake of a hotter-than-expected read for consumer price inflation. The U.S. dollar and gold traded lower.

The Markets…

The Dow Jones Industrial Average declined 21 points (0.1%) to 16,392

The S&P 500 Index was nearly unchanged at 1,918

The Nasdaq Composite gained 17 points (0.4%) to 4,504

In moderately-heavy volume, 1.2 billion shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil declined $1.18 to $31.75 per barrel, wholesale gasoline decreased $0.01 to $0.96 per gallon

The Bloomberg gold spot price lost $2.33 to $1,228.54 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 96.64

Markets were higher for the week, as the DJIA increased 2.6%, the S&P 500 Index added 2.8%, and the Nasdaq Composite Index gained 3.8%

Consumer price inflation tops expectations

The Consumer Price Index (CPI) was flat month-over-month in January, versus the Bloomberg forecast of a 0.1% dip, while December’s 0.1% decline was unrevised. The core rate, which strips out food and energy, rose 0.3% m/m, compared to expectations of a 0.2% increase, and December’s upwardly revised 0.2% gain. Y/Y, prices were up 1.4% for the headline rate, versus forecasts of a 1.3% gain, while the core rate was 2.2% higher, north of projections of a 2.1% rise. December’s y/y figures showed an unrevised 0.7% rise and an unadjusted 2.1% increase for the headline and core rates respectively.

Treasuries were mostly lower following the report, with the yield on the 2-year note rising 5 basis points to 0.74% and the yield on the 10-year note increasing 1 bp to 1.75%, while the 30-year bond rate was flat at 2.61%.

Europe lower and Asia mixed to close out an upbeat week

European equities traded lower, with markets in Asia mixed and pressure on financials returning, trimming a solid weekly advance of about 4.5% for the Stoxx Europe 600 Index. Mixed earnings were in focus, while oil & gas issues were bogged down by the weakness in crude oil prices. The euro ticked higher late in the session versus the U.S. dollar and bond yields in the region were mixed. In economic news, U.K. January retail sales rose much more than forecasted.

Stocks in Asia finished mixed after the U.S. markets snapped a three-session rally yesterday, with declines in oil prices weighing on the energy sector. However, most major markets in the region finished nicely higher for the week, led by the best weekly advance in Japan in six years and the largest weekly gain in China in two months, per Bloomberg.

Japanese equities fell as the yen gained ground, while stocks trading in mainland China Hong Kong ticked slightly lower. Relative stability in the global markets, noticeably in the oil and commodity markets, helped boost stocks, along with signs that the Chinese government was increasing support for its slowing economy. Australian securities traded lower, with oil & gas and basic materials issues showing some weakness, while South Korean listings ticked higher to add to their weekly advance. Finally, Indian equities gained ground with automakers and financials helping extend its largest weekly gain in four months.

Market Insight 2/16/2016

Markets Surprise with Post-Holiday Gains

Despite a decline in oil prices following an agreement among major world oil producers that didn’t yield a hopeful production cut, as well as some lackluster economic news, U.S. equities began the holiday-shortened week with solid gains.

Treasuries were lower, as was gold, while the U.S. dollar was higher.

The Markets….

The Dow Jones Industrial Average (DJIA) jumped 222 points (1.4%) to 16,196

The S&P 500 Index advanced 31 points (1.7%) to 1,896

The Nasdaq Composite rallied 98 points (2.3%) to 4,436

In heavy volume, 1.2 billion shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.40 to $29.04 per barrel and wholesale gasoline decreased $0.07 to $0.97 per gallon

The Bloomberg gold spot price fell $8.11 to $1,201.19 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—shot 1.0% higher to 96.89

Homebuilder sentiment dips, NY manufacturing activity continues to contract

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month declined to 58—the lowest level since May 2015—from January’s upwardly revised 61figure from the originally-reported 60 level, where the Bloomberg estimate had called for it to remain. Builder confidence remained above 50, which separates good and poor conditions, for the twentieth-straight month. The NAHB noted, “Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market,” while adding that they expressed optimism that sales will pick up in the coming months.

We feel much of the rest of the economy continues to look fairly healthy, notably the all-important labor market and the more heavily-weighted services sector that remains in growth territory. Also, rising house prices indicate and help to facilitate confidence among consumers.

The Empire Manufacturing Index showed the contraction in output from the New York region (a reading below zero) for February remained. The index improved to -16.6 from the unrevised -19.4 in January, with forecasts calling for an improvement to -10.5.

Treasuries finished lower, as the yield on the 2-year note ticked 1 basis point (bp) higher to 0.72%, the yield on the 10-year note rose 3 bps to 1.79%, and the 30-year bond rate advanced 4 bps to 2.65%.

Although shortened by Monday’s holiday, today’s data kicks off this week’s U.S. economic calendar, which will begin to really heat up tomorrow with the release of housing starts and building permits, with economists expecting a 2.0% month-over-month increase in starts for January to an annual rate of 1.2 million units, while permits are anticipated to show a decline of 0.3% m/m to a 1.2 million unit rate. Also on tap is the Fed’s industrial production and capacity utilization report, with production forecasted to rise 0.5% m/m during January and utilization to inch higher to a level of 76.7%, as well as the Producer Price Index (PPI), with January’s headline rate expected to match December’s 0.2% decline, and excluding food and energy, January’s core rate is anticipated to duplicated the prior month’s 0.1% increase.

However, tomorrow’s afternoon release of the January monetary policy meeting minutes from the Federal Open Market Committee (FOMC) will likely headline the docket amid the backdrop of heightened Fed rate hike uncertainty. The Fed is in a tight spot. Having just raised interest rates in December and expressed optimism about the outlook for the economy and inflation, it can hardly reverse course just because of volatile stock markets. With the employment picture improving, the big questions for the Fed revolve around weak inflation prospects and tightening financial conditions.

Europe mostly lower after two-day jump, Asia adds to yesterday’s rally

European equities traded mostly to the downside, with early gains being relinquished as oil & gas issues came well off of the best levels of the day. Traders appeared to be disappointed somewhat that a meeting between some of the world’s largest oil producers, including Saudi Arabia and Russia, only delivered an agreement on an output freeze at January levels if other exporters joined the pact. Some were hoping for a production cut following the meeting. European stocks came off a two-day rally that has ensued amid increased expectations of continued monetary policy support from the European Central Bank (ECB), with President Draghi reiterating late-yesterday that further stimulus may be in the offing.

Financials saw some pressure on continued concerns about bad loans, as well as some analyst downgrades in the sector, while basic materials led to the downside. In economic news, German investor confidence for February fell to the lowest level since October 2014, while U.K. consumer price inflation fell more than expected for January. The euro declined versus the U.S. dollar and bond yields in the region traded mostly higher.

Stocks in Asia finished mostly higher, extending yesterday’s rally that came as mainland Chinese stocks returned to action following a week-long holiday, while markets in Hong Kong also took part in the advance. Commodity-related stocks moved higher today, led by oil & gas issues on speculation of an output deal among some of the world’s largest oil producers, while some upbeat January Chinese lending data buoyed sentiment. China’s new yuan loans easily topped forecasts and the nation’s aggregate financing—a gauge of total credit issued—also came in well above expectations. The reports followed a disappointing trade balance report released over the weekend.

Japanese equities ticked higher, after yesterday’s sharp rally that came as the yen gave back some of its recent jump on a rush to safe-haven assets amid heightened market volatility. Australian securities also advanced, getting a boost from oil & gas and basic materials stocks, along with South Korean listings after the Bank of Korea left its monetary policy unchanged, but India’s bourse fell after posting the largest rally in a year yesterday.

Market Insights 2/12/2016

Stocks See Gains, Crude Higher

U.S. equities closed out the final trading day of the week with solid gains amid a sharp rally in crude oil prices and as domestic and European bank stocks bounced back after being pummeled recently.

In economic news, a stronger-than-expected advance read for January retail sales aided in buoying sentiment ahead of the extended Presidents’ Day holiday weekend.

Treasuries and gold lost ground, while the U.S. dollar moved higher.

The Markets…

The Dow Jones Industrial Average jumped 314 points (2.0%) to 15,974

The S&P 500 Index advanced 36 points (2.0%) to 1,865

The Nasdaq Composite gained 71 points (1.7%) to 4,338

In heavy volume, 1.2 billion shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil rallied $3.23 to $29.44 per barrel and wholesale gasoline increased $0.10 to $1.04 per gallon

The Bloomberg gold spot price decreased $8.11 to $1,238.59 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 95.99

Markets were lower for the week, as the DJIA decreased 1.4%, the S&P 500 Index lost 0.8%, and the Nasdaq Composite Index declined 0.6%.

January retail sales top forecasts, consumer sentiment dips

Advance retail sales for January were up 0.2% month-over-month (m/m), above the Bloomberg forecast of a 0.1% increase, while December’s 0.1% dip was adjusted to a 0.2% gain. Also, last month’s sales ex-autos rose 0.1% m/m, versus expectations of a flat reading, while the 0.1% decline in the previous month was revised to a 0.1% increase. Sales ex-autos and gas were higher by 0.4% m/m for January, versus the 0.3% increase that was anticipated, while December’s flat reading was revised to a rise of 0.1%. Finally, the retail sales control group, a figure used to help calculate GDP, advanced 0.6%, well above the projected 0.3% gain, and a rebound from the prior month’s unrevised 0.3% decline.

The preliminary University of Michigan Consumer Sentiment Index declined to 90.7 this month from 92.0 in January, and compared to estimates calling for 92.3. The economic conditions and outlook components both declined. The 1-year inflation projection remained at 2.5%, while the 5-10 year inflation outlook dropped to 2.4% from 2.7%.

The Import Price Index declined 1.1% m/m for January, compared to the projection of a 1.5% drop, and December’s 1.2% decline was revised to a 1.1% fall. Y/Y, prices were lower by 6.2%, versus the 6.8% forecasted drop, and following December’s upwardly revised 8.1% fall.

Business inventories rose 0.1% m/m in December, matching forecasts, and November’s 0.2% decline was revised to a 0.1% dip. Sales declined 0.6% m/m, and the inventory-to-sales ratio—the time it would take to deplete inventories at the current sales pace—ticked higher to 1.39 from November’s 1.38 pace.

Treasuries were lower, with the yields rising, as the yield on the 2-year note rose 6 basis points to 0.71%, the yield on the 10-year note gainied 8 bps to 1.74%, and the 30-year bond rate advanced 9 bps to 2.59%.

Please Note: All U.S. markets will be closed on Monday in observance of the Presidents’ Day holiday.

Europe rebounds from yesterday’s pounding, Asia mostly lower

European equities traded higher, with oil & gas issues recovering somewhat from their recent rout as crude oil prices rallied sharply. Financials were one of the best performers after being pummeled as of late on heightened credit concerns and exacerbated worries over the impact of a low interest rate environment on profits. In economic news, preliminary Eurozone Q4 GDP grew at a 0.3% quarter-over-quarter pace, matching estimates and the expansion posted in Q3. Germany’s GDP grew in line with forecasts, while Italy’s output missed expectations. German consumer price inflation fell in January, while French Q4 wages and non-farm payrolls rose, and U.K. construction output in December rose at a smaller-than-expected pace. Eurozone industrial production unexpectedly dropped in December. The euro traded lower versus the U.S. dollar and bond yields in the region were mixed.

Stocks in Asia finished mostly lower with the global markets remaining under siege on the continued rout for the banking sector on credit crisis fears and as traders grappled with the impact of a plethora of central banks adopting or considering “negative interest rate policies” (NIRP). Japanese equities tumbled after being closed for a holiday yesterday, when the global markets continued to selloff. The yen’s recent rally, which hit a 15-month high versus the U.S. dollar on heightened safe-haven buying, pressured the market, notably export-related issues. This was the biggest weekly drop for Japanese stocks since 2008, per Bloomberg. The yen has rallied despite the Bank of Japan’s (BoJ) surprising adoption of a NIRP at the end of January, and has prompted speculation that the BoJ may intervene in the currency markets to help stabilize the yen. Japan’s Finance Minister Aso said on Friday that “they are watching market movements and will take any action necessary.”

Stocks trading in South Korea and Australia fell, with banking stocks notable decliners, while Indian securities ticked higher in choppy action, ahead of reads on the nation’s industrial production and consumer price inflation after the closing bell, with the former falling more than expected and the latter coming in hotter than anticipated. Mainland Chinese markets remained closed for the week’s lunar new year holidays.

WEEKLY RECAP: Stocks post back-to-back weekly drops as global rout persists

The global equity markets were broadly lower on the week, with U.S. stocks lower for the second-straight 5-day period. Financials took it on the chin with credit quality fears punishing European banks and the overall sector being hampered by profitability concerns amid the low interest rate environment and increasing adoption/consideration of negative interest rate policies (NIRP) among global central banks.

The Japanese yen and gold rallied amid a rush to safe-haven assets, which also pressured U.S. Treasury yields, with the 10-year note falling to more than a 3-year low. Crude oil fell further to the lowest levels in more than 12 years before Friday’s rally.

Volatility in the markets was bolstered by U.S. Federal Reserve Chairwoman Janet Yellen delivering her two-day Congressional monetary policy testimony. Yellen did not close the door on further rate hikes this year, but did note that the Central Bank is revisiting the possibility of NIRP and that global economic weakness, notably in China, poses a risk to the U.S. economic outlook. Q4 earnings season remained on the back-burner, though bottom-line results continued to mostly top forecasts.

Per data compiled by Bloomberg, of the 381 companies in the S&P 500 that have reported thus far, about 76% have exceeded profit projections, compared to an approximate 48% rate that have bested revenue estimates.

Based on recent economic data, we don’t believe either the global or U.S. economies will fall into recession, although the risks have increased. Markets don’t like uncertainty, and there are a number of unknowns hanging over investors right now. For example: When will oil prices stabilize? How quickly and by how much will the Chinese economy slow? What’s the outlook for the U.S. economy? Will we see heavy defaults by less-creditworthy companies? How will central banks react to global conditions? Will the Fed move too quickly, too slowly or just right in raising interest rates? Until these issues are resolved, we expect elevated volatility to continue.

THE WEEK AHEAD: Flurry of data for markets to chew on next week

Although shortened by Monday’s holiday, next week’s U.S. economic calendar will bring a plethora of key reports for the markets to consider amid the backdrop of ramped up further Fed rate hike uncertainty. Wednesday’s afternoon release of the January monetary policy meeting minutes from the Federal Open Market Committee (FOMC) will likely headline the docket, which includes other key reports: the Empire Manufacturing Index, the Philly Fed Manufacturing Index, the NAHB Housing Market Index, housing starts and building permits, industrial production and capacity utilization, as well as the CPI and PPI.

We feel the Fed is in a tight spot. Having just raised interest rates in December and expressed optimism about the outlook for the economy and inflation, it can hardly reverse course just because of volatile stock markets. With the employment picture improving, the big questions for the Fed revolve around weak inflation prospects and tightening financial conditions.

International reports slated for next week include: Australia—Reserve Bank of Australia meeting minutes, and employment change. China—new yuan loans, aggregate financing, foreign direct investment, the trade balance, and CPI and PPI. India—trade balance. Japan—4Q GDP, industrial production, machine orders, and trade balance. Eurozone—trade balance, new car registrations, and consumer confidence, along with German investor confidence. U.K.—inflation figures, retail sales, and unemployment rate.

Market Insights 2/11/2016

Markets Bounce Off Lows

U.S. equities were able to bounce off the lows of the day that came amid continued uneasiness over global growth, and finish near the flat-line. Energy issues again came under solid pressure amid the relentless fall in crude oil prices, while financials also saw losses. Treasuries were mixed and gold was higher, while the U.S. dollar was lower.

The Markets…

The Dow Jones Industrial Average lost 13 points (0.1%) to 16,014

The S&P 500 Index lost just a shade over a point (0.1%) to 1,852

The Nasdaq Composite fell 15 points (0.4%) to 4,269

In heavy volume, 1.2 billion shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil declined $1.75 to $27.94 per barrel and wholesale gasoline lost $0.06 to $0.90 per gallon

The Bloomberg gold spot price inched $0.92 higher to $1,190.15 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% lower at 96.04

Small business optimism declines, while job openings top forecasts

The National Federation of Independent Business Small Business Optimism Index for January declined to 93.9 from December’s 95.2 level, and versus the Bloomberg forecast calling for a dip to 94.5.

Wholesale inventories dipped 0.1% month-over-month in December, compared to the forecast of a 0.2% decline and November’s downwardly revised 0.4% decrease. Sales declined 0.3% m/m, compared to the 0.4% decrease that was expected, and the inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at November’s 1.32 months level.

The Labor Department’s Job Openings and Labor Turnover Survey, a measure of unmet demand for labor, showed 5.61 million jobs were available to be filled in December, versus the downwardly revised 5.35 million openings in November, and versus forecasts of 5.41 million. Within the report, the hiring and total separations rates remained at 3.7% and 3.5%, respectively.

Treasuries were mixed, as the yield on the 2-year note ticking 1 basis point higher to 0.68%, while the yield on the 10-year note dipped 1 bp to 1.74%, and the 30-year bond rate slid 2 bps to 2.56%.

While tomorrow’s only economic report will be MBA Mortgage Applications, Federal Reserve Janet Yellen is scheduled to provide her semiannual monetary policy testimony before the House Financial Services Committee on Capitol Hill, which will likely command investors’ attention.

Europe and Asia broadly lower

European stocks finished solidly to the downside, with basic materials and oil & gas stocks remaining in selloff mode, but financials lead the drop amid concerns toward the impact on the sector of the persistent heightened global volatility. The global markets have been in turmoil, courtesy of currency/growth concerns, which have contributed to the rout in the commodity markets, and exacerbated by uncertainty regarding the global monetary policy front. The euro was higher versus the U.S. dollar and bond yields in the region were mixed. Adding to the dampened sentiment, German industrial production unexpectedly fell for December, along with the nation’s exports.

Stocks in Asia finished decisively to the downside, though volume remained light with the lunar new year holidays having markets in mainland China, Hong Kong and South Korea closed. Stocks fell amid the global market turmoil, led by a 5.4% tumble for Japan’s Nikkei 225 Index, getting pressure from the persistent rally in the yen, which hit the highest level versus the U.S. dollar since November 2014, as the markets continued to reset U.S. Fed rate hike expectations and grapple with the Bank of Japan’s (BoJ) recent decision to adopt a negative interest rate policy (NIRP). Also, the yield on Japan’s benchmark 10-year bond posted a decline below zero for the first time as risk aversion ramped up.

Australian stocks fell, with technology and financials continuing their selloff, while listings in India dropped, as the heightened global volatility overshadowed the nation’s stronger-than-expected 4Q GDP report, reported late yesterday, which showed growth of 7.3% y/y, from the upwardly revised 7.7% expansion posted in 3Q, and compared to estimates of a 7.1% increase.