The stock market continued its relentless push higher, which resulted in the sixth consecutive weekly advance for the S&P 500 and Dow Jones Industrial Average, cruising past 21,000. The benchmark index gained 0.7% for the week, extending its first quarter advance to 6.4%.
The first two days of the week were highlighted by sideways action as most participants sat on their hands ahead of President Donald Trump’s first address to Congress, which took place on Tuesday evening. There was some profit taking ahead of the evening address on Tuesday, but not only was the selling limited, it took place after a strong run in February that ended with the S&P 500 gaining 3.7% for the month.
Tuesday’s modest downtick was wiped out in short order as equity indices charged out of the gate on Wednesday, jumping to new record highs. The upbeat disposition was attributed to President Donald Trump’s address, which was free of surprises and deemed ‘presidential’ by pundits. President Trump reiterated his commitment to a $1 trillion infrastructure plan and made another mention of a big tax reform plan on the horizon.
However, it wasn’t all President Trump as investors received some positive news from the global economic front on Thursday. China’s Manufacturing PMI for February (51.6; expected 51.1) beat expectations while eurozone Manufacturing PMI (55.4; expected 55.5) ticked down slightly, but remained in expansion.
On the domestic data front, fourth quarter GDP was left unrevised at 1.9% in the second estimate, while more recent data like February Chicago PMI, February Consumer Confidence, and February ISM Index beat expectations. That combination, and some hawkish comments from Fed officials, contributed to a notable shift in rate hike expectations.
The fed funds futures market ended the week showing a 79.9% implied probability of a rate hike in March, indicating a prevailing belief that the Federal Reserve is likely to raise the target range for the fed funds rate at its March 14-15 FOMC meeting. Fed Chair Yellen herself contributed to those increased expectations with a speech on Friday in which she indicated a further adjustment in the fed funds rate would likely be appropriate at the March meeting if the FOMC’s evaluation of matters concludes that employment and inflation are continuing to evolve in line with its expectations.
This week also featured the widely-hyped IPO of social media company Snap (SNAP) on Thursday. The IPO priced at $17, yet the stock snapped higher when it first opened for trading, hitting the $24.00 mark before closing the session at $24.48 and finishing the week at $27.08.
The featured item in the coming week will be the February Employment Situation Report.
Enjoy your weekend!