Markets experienced another hot week as the Dow posted its best winning streak since 1996, with ten days up in a row, while the S&P 500 inched within 10 points of its historical high before closing lower on Friday.[i] For the week, the S&P 500 gained 0.61%, the Dow gained 0.81%, and the Nasdaq gained 0.14%.[ii]
We’re disappointed to report that lawmakers don’t appear to be making any headway on the sequestration front. President Obama met with House Republicans last week but made little progress in convincing them to accept tax increases as part of a deficit reduction plan. With criticism flying from both sides, it seems that they are still too far apart to hope for a deal.[iii]
On a more positive note, the number of Americans filing new unemployment claims fell for the third straight week, indicating that the labor market is recovering steadily. Initial claims dropped by 10,000 claims, handily beating expectations of a rise in claims. Even better, the four-week moving average for new claims, widely considered a less volatile measure, fell to a new five-year low, suggesting that underlying labor market trends are improving.[iv]
A surge in energy costs led to an increase in the Consumer Price Index, a broadly used measure of inflation. The CPI increased by 0.7% in February after remaining flat in January. However, excluding volatile food and energy prices, the more stable core prices increased just 0.2%, which was in line with expectations.[v]
Historically, markets have often pulled back after reaching historic highs. While we believe that general economic trends are heading in the right direction, in the short term, we won't be surprised by some market consolidation as traders take profits and plan their next moves. We always maintain focus on long-term financial movements and use these short-term dips and rallies to build new positions and find opportunities.
Wednesday: Retail Sales, Import and Export Prices, Business Inventories, EIA Petroleum Status Report, Treasury Budget
Thursday: Jobless Claims, Producer Price Index
Friday: Consumer Price Index, Empire State Mfg. Survey, Treasury International Capital, Industrial Production, Consumer Sentiment