Market Recap Week ending 3.8.19

-Darren Leavitt, CFA

Economic growth concerns along with the inability of the S&P 500 to maintain a key technical level hobbled the market last week.  The market lost ground for five consecutive days.  For the week, the S&P 500 and Dow lost -2.2% while the NASDAQ gave up -2.5% and the Russell 2000 fell -4.3%.  Treasuries were bid higher as investors sought safe haven assets.  The 2-year yield decreased 11 basis points and closed at 2.44% while the 10-year shed 13 basis points and closed at 2.63%.  There were no changes to our models last week.

Weak economic outlooks took hold of investors last week. The European central bank cut its forecast for 2019 GDP to 1.1% from its December estimate of 1.7%.  The ECB also announced that there would be no further rate hikes in 2019 and that they would introduce a targeted long-term refinancing operation later in the year.  Additionally, the Organization for Economic Cooperation and Development reduced its outlook for global GDP to 3.3% from 3.5%.  These forecasts were also accompanied by some weak economic data.  China Export data was especially ugly with February data showing a decline of 20%.  The Employment Situation report in the US also turned heads as the headline, Non-farm payrolls came in at 20k which was well below estimates.  However, the overall report did show a drop in the unemployment rate and a nice uptick in average hourly earnings.  The Beige book revealed slight to moderate growth in 10 of 12 districts.  It was certainly a week of half empty sentiment.  That said, the ISM non-manufacturing data looked pretty good at 59.7 versus the estimate of 57.2- the new orders component was especially encouraging.

Technically the market has run into a very heavy line of resistance at just above 2800.  The S&P was bought up to the level but has failed there and now given up its 200-day moving average.  The market has been overbought and probably needs to come back a bit- 2600 seems like an interesting level, and the market will likely find some key technical support there.

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