Last week's economic data, Fed minutes and New York Fed President William Dudley's comments only added to the questions surrounding the strength of the economy and the timing of any increase in interest rates. The two most talked about U.S. economic statistics for the week were the ISM Non-Manufacturing Composite for March, which met economist expectations by coming in at 56.5 (any reading above 50 shows growth), and Thursday's jobless claims number of 281,000 for the week ending April 4.
The initial claims number supported the view that the March employment number was heavily affected by bad weather and that the overall employment trend continues to be strong.
The Fed minutes showed a Fed that is split over the timing of the first increase in interest rates in almost nine years. Several committee members thought a June increase is warranted, while others felt that it would not be appropriate to begin raising rates until later in the year.
Further, comments by Dudley that the pace of rate hikes will depend heavily on the reaction of financial markets to the increase in interest rates, only adds uncertainty to the upcoming Fed meetings and the overall market environment.
This week, we will see more economic data and numerous first quarter earnings reports. Both of these factors could be key in determining the timing of a Fed move and the strength of the economy. Pay particular attention to retail sales, the components of the inflation data (CPI and PPI) and the University of Michigan Consumer Sentiment Survey. The week also brings the release of the Fed's Beige Book, which may provide additional data on how the economy is doing in the various Fed districts.
Within the past week, most markets remained solid in the near- and intermediate-term technical ranges that I have written about the last few weeks. Watch for any breakout of the S&P 500 on key technical levels of 2109 and 2040. A quick two to three percent market move is possible on any breakout of this range. For the 10-year treasury yield, watch for a breakout in the 2.00 to 1.86 percent trading range. If this range is violated, look for a retest of the 1.64 percent January low or the 2.24 percent March high in yields. Keep an eye on the strengthening dollar versus the euro. Last week's four percent move has not received much market attention, and we are closing in on the March lows for the euro at 1.05.
< Go to Monday Morning Perspectives
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.
