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Sunday Coffee with Eirik: Market Recap 3-5-2017

Stocks continued their march higher this week and The S&P 500 and Dow Jones Industrial Average logged its sixth consecutive week of advance. On Monday and Tuesday traders and investors were mostly sitting on their hands, waiting for President Trump’s first address to Congress, which took place on Tuesday evening. We saw some profit taking take place on Tuesday afternoon, but overall the bulls were still in control.

Stocks continued their march higher this week and The S&P 500 and Dow Jones Industrial Average logged its sixth consecutive week of advance. On Monday and Tuesday traders and investors were mostly sitting on their hands, waiting for President Trump’s first address to Congress, which took place on Tuesday evening. We saw some profit taking take place on Tuesday afternoon, but overall the bulls were still in control.

Upbeat economic data also helped the markets this week, as both China and The Euro Zone’s PMI Manufacturing numbers were positive. On the domestic front, fourth quarter GDP was left unrevised at 1.9%, while both the February Consumer Confidence and ISM Index beat expectations.

The upbeat markets and strong economic data contributed to a notable shift in rate hike expectations. According to the CME, there is now approximately an 80% probability of a rate hike in March. Fed chair Janet Yellen spoke on Friday where she indicated that that a further adjustment in the fed funds rate would likely be appropriate at the March meeting if the FOMCs evaluations of matters concludes that employment and inflation will continue to evolve in line with its expectations. Investors and traders are now anticipating 3 rate hikes during 2017.

“With the odds so high in the market, I think they will raise rates,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. “The market is giving the Fed the green light to raise.

“It seems the market is willing to accept a rate hike if the data support it,” said Quincy Krosby, market strategist at Prudential Financial. But “clearly, the market at this point is overextended.” “That doesn’t mean it can’t go higher. That said, there is more caution from institutional investors,” she said.

“Although the stock market rally has been phenomenal this quarter, investors should remain vigilant as the bearish attributes for a selloff still linger in the background. The political risks in Europe, Brexit woes and ongoing Trump uncertainties could still trigger a wave of risk aversion,” said Lukman Otunuga, research analyst at FXTM.

On that note, take some profits or adjust your stop losses in order to manage risk appropriately.
The highlight of the week was the widely-hyped IPO of social media company Snap ($SNAP) on Thursday.
The IPO priced at $17, while the stock opened at $24 and closed the session with a 44% gain at $24.48. Snap continued climbing on Friday and finished the week up another 10.66% at $27.08.


Caterpillar ($CAT) sold off after news on Thursday that federal agents had searched its offices. CEO Jim Umpleby has apologized to the company’s employees for raids that took place on Thursday by federal authorities at the company’s Illinois facilities. The search was in connection with an investigation into Caterpillar’s Swiss-based subsidiary which has been under review for over three years.


Costco ($COST) tumbled 4% after reporting a disappointing second quarter and announcing plans to hike its membership fees. The bulk warehouse retailer earned $1.17 a share over its recent quarter, down from $1.24 a share a year earlier and below consensus of $1.36. Sales increased 6% to $29.13 billion, falling short of estimates of $29.85 billion. Comparable-store sales climbed 3%, weaker than targeted 3.6% growth. Costco said annual membership fees will increase by $5 for North American individual and business customers, effective June 1.



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