OK, the old saying of course is that March comes in like a lion and goes out like a lamb, referring to the weather in the upper Midwest where I grew up.
Major Market Averages racked up gains of 2%+ to start the month, with NASDAQ gaining nearly +3%. The big trick now is to get it to “stick” beyond the “first day of the month” bump aided by fresh cash from dividend reinvestment flows and structured mutual fund purchases.
Tuesday recap: Equity markets got an assist from friendly macro data on the economy as the National ISM report for February came slightly better than consensus at 49.5. While still just below the expansion/contraction threshold of 50.0, it was also an improvement from the January reading of 48.2.
FOMC #BeigeBook at 2:00 PM will get extra attention withaa FED policy meeting later this month.
— Timothy Anderson (@TJAnderson1) March 2, 2016
It also gave some credence to the talk that the eight point drop in the Chicago PMI report from Tuesday was an outlier. Construction spending for January also beat consensus at +1.5%. While likely aided by a moderate winter in the northeast and Midwest, it immediately spurred talk that GDP estimates for Q1 2016 will likely be adjusted higher.
Oil continued to move higher, with WTI settling just below $34. We’ll get the weekly Oil inventory report at 10:30 am. We’ll likely have another build, testing the resilience of the move higher in oil over the last 3 weeks.
It’s quite apparent that stocks have not been as fixated with the price of oil day to day and minute to minute as they were the first 6 weeks of the year. I’m sure a big part of this is that oil has held the $30 level now for at least 2 weeks. If Oil can continue to build a base in the $30 to $35 level it will do a lot to add stability to stock prices.
The next 3 days could be very critical for setting a tone of market stability the remainder of Q1 and hopefully into Q2. Stocks have had an impressive move higher off the February 11 lows. Major Market averages are at their highest levels since mid January, although a few of them are now running into their 200 day resistance zone.
We also have a full plate of macro data on the economy the remainder of this week:
Today at 2:00 pm the FOMC will release the March beige book, always a point of micro analysis by “FED heads”. With an FOMC policy meeting later this month the Beige Book report is certain to get a lot of attention.
Thursday at 10:00 am we’ll get a report on January Factory Orders and February ISM service sector reading. Both are expected to show significant improvement from their prior month. January Factory orders are expected to be in the range of +2% to +3% after a dismal -2.9% for December.
The ISM Services for February is expected to come in right around 53.0. That would be a slight decline from 53.5 in January but keep in mind that the January reading was the lowest reading since March 2014.
Friday at 8:30 am is the February NFP and employment report. Normally this would be a central focus for the market, but there have been few outliers here in the last year, so my feel is anything near the consensus of +180,000 likely has minimal impact.
March Comes in like a Bull….
The Early Line: Stock index futures are projecting a modestly lower opening, which is understandable after 2% gains yesterday. Keep an eye on whether the S&P 500 catches support above the 1950 level which was the breakout level yesterday.