March 2, 2017

 Stocks opened lower this morning (Dow -52 pts; SPX -.47%). Just about every sector group is in the red after yesterday’s monster rally.  Only utilities are in the green (+.4%). And by the way, in terms of price momentum, some of the cyclical sectors (financials, energy, industrials) have been weaker over the last month, whereas the defensives (consumer staples, utilities) have been stronger. But that trend may not be durable if interest rates continue to rise. Today, the dollar is a bit stronger and commodities are lower. WTI crude is down 1.6% to $52.95/barrel. Copper, gold and iron ore are all lower. Bonds are selling off as yields head higher. The 5-year Treasury yield spiked to 2.02% and the 10-year yield jumped to 2.48%.

The S&P 500 Index has not had a 1% daily loss in 96 trading days. And Mike Santolli of CNBC notes the market has defied many investment analysts who have called for a correction in early 2017. Yes, the “technicals” on the market look precarious, with some short-term “overbrought” indicators. But, he says, the market is “supported by upturns in corporate earnings and global economic activity, while accompanied by rock-solid credit conditions.” At the same time, “Hopes for business-friendly policy are keeping investors willing to accept higher valuations…”

Jim Cramer, on his show Mad Money, addressed persistent calls by a some prominent investors (I’m thinking George Soros, Bill Gross, Carl Icahn) to sell out of stocks. The bottom line, he says, is that they’ve been wrong. “Group-think is dangerous.” Meanwhile, the global economy is improving. The world is rapidly being “restored…to pre-crisis levels.” And he reminds us that this is still a bull market. It’s hard to bet against.” 

Bloomberg reports Federal Reserve Governor Jerome Powell believes the Fed will raise its short-term policy interest rate this month. He says the case for a rate hike has “come together” and that “we’re as close to our mandates as we’ve been in a very long time.” He’s referred to the fact that the economy is at full employment and inflation is accelerating back to normal levels. The Fed’s policy meeting is scheduled for March 14-15. We understand other Fed officials (William Dudley, Lael Brainard) have expressed similar views over the past week.   

*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.