Markets closed out another solid week of gains on the back of higher oil prices and some positive economic data. For the week, the S&P 500 increased 1.58%, the Dow grew 1.51%, and the NASDAQ added 1.91%.[1]

Investors got their second look at fourth-quarter 2015 Gross Domestic Product (GDP) last week. The latest data shows that the economy grew 1.0% last quarter versus the 0.7% originally reported. Economists had forecast a drop in GDP growth to 0.4%, so the increase was a welcome surprise and helped tamp down recession worries.[2]

In another positive sign, consumer spending rose steadily in January and inflation increased closer to the Federal Reserve target of 2.0%. These encouraging indicators could support another rate hike since they bolster the growth picture for this year.[3] Though the Fed could technically raise rates at the next meeting in March, most economists don't expect to see higher rates until June at the earliest.[4]

Though we expect volatility to continue over the next weeks and months, one contributor to volatility may be losing its grip. Over the last few months, U.S. equities have followed Chinese stocks over the edge, responding to worries about the health of the world's second-largest economy. However, last week, though Chinese equities tumbled again, American stocks closed out the week positive. The divergence is a relief because it could indicate that the short-term connection between U.S. and Chinese markets is breaking down as investors return to fundamentals.[5]

Does this mean that what happens in China will cease to affect American investors? Probably not, but we can hope that investors stop worrying about every little twitch in China's markets.

The week ahead holds more economic data, the highlight being the February jobs report that comes out on Friday. Based on the weekly gains reported so far, we're expecting a solid showing and hoping for continued increases in wages, which could help boost consumer spending this year. Investors will be looking for signs that the domestic economy can withstand trouble abroad and hoping for signs of increased economic activity in the first quarter of 2016. Election-year politicking may add uncertainty when votes are tallied on Super Tuesday this year.

ECONOMIC CALENDAR:

  • Monday: Chicago PMI, Pending Home Sales Index, Dallas Fed Mfg. Survey
  • Tuesday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg. Index, Construction Spending
  • Wednesday: ADP Employment Report, EIA Petroleum Status Report, Beige Book
  • Thursday: Jobless Claims, Productivity and Costs, Factory Orders, ISM Non-Mfg. Index
  • Friday: Employment Situation, International Trade

HEADLINES:

New home sales fall sharply. Sales of newly built homes plummeted from a 10-month high in January. However, the fall seems to be largely because of unusually low activity in the West and the overall housing market appears to be healthy.[6]

Consumer confidence declines in February. A measure of how Americans feel about the economy fell last month as consumers grew more pessimistic about their financial prospects.[7]

Durable goods orders rise. New orders for long-lasting manufactured goods like electronics, appliances, and vehicles rose in January by the most in 10 months. The uptick in demand is a positive sign for the manufacturing sector this quarter.[8]

Jobless claims rise, but remain stable. The number of Americans filing claims for new unemployment benefits rose last week, but the overall trend remains positive. Continuing claims also fell, indicating that workers are finding jobs and moving off benefits.[9]

 

FOOTNOTES:
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 
Diversification does not guarantee profit nor is it guaranteed to protect assets.
 
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
 
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
 
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
 
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
 
The S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.
The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
 
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
 
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Gross Domestic Product (GDP) is a measure of output from U.S. factories and related consumption in the United States.  It does not include products made by U.S. companies in foreign markets.
 
A recession is a significant decline in activity across the economy, lasting longer than a few months.  The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.
 
Inflation is the rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market.
 
None of the information in this document should be considered as tax advice.  You should consult your tax advisor for information concerning your individual situation.
 
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
 
Past performance does not guarantee future results.
 
You cannot invest directly in an index.
 
Consult your financial professional before making any investment decision.
 
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
 
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
1 http://finance.yahoo.com/q/hp?s=%5EGSPC&a=01&b=22&c=2016&d=01&e=26&f=2016&g=d
 
http://finance.yahoo.com/q/hp?a=01&b=22&c=2016&d=01&e=26&f=2016&g=d&s=%5EDJI%2C+&ql=1
 
http://finance.yahoo.com/q/hp?a=01&b=22&c=2016&d=01&e=26&f=2016&g=d&s=%5EIXIC%2C+&ql=1
 
2 http://www.cnbc.com/2016/02/26/us-q4-2015-revised-gdp.html
 
3 http://www.reuters.com/article/us-usa-economy-idUSKCN0VZ1RP
4 http://projects.wsj.com/econforecast/#qa=20160201001
5 http://www.cnbc.com/2016/02/25/are-chinese-stocks-losing-hold-over-us-markets.html
 
6 http://www.foxbusiness.com/markets/2016/02/24/new-home-sales-fell-sharply-in-january.html
 
7 http://www.foxbusiness.com/markets/2016/02/23/consumer-confidence-gauge-declines-in-february.html
 
8 http://www.foxbusiness.com/markets/2016/02/25/january-durable-goods-orders-rise-4-9.html
9 http://www.cnbc.com/2016/02/25/us-weekly-jobless-claims-feb-23-2016.html