March 28, 2017

Stocks opened sharply higher this morning, temporarily reversing recent declines. The Dow is currently up 100 pts and the SPX is up .54%. Banks, transports and energy stocks are bouncing back, whereas gold miners & telecoms are lower in early trading. The VIX Index is trading back down to 12.2, so no panic there. But while the major stock market averages (and the VIX) haven’t really moved much lately, individual sectors have. Energy is down nearly 9% year-to-date, telecom is down 5%, technology is up 11% and healthcare is up almost 8%. So volatility is still very much a part of this market. 

The dollar is up slightly today and commodities are mostly higher. Iron ore is up 2%, coper is up .4% and WTI crude oil is up 1.8% to trade around $48.60/barrel. Stocks are still closely tracking oil, so any firming there will help. Bonds are mixed in early trading. Junk bond funds are seeing significant inflows and today the SPDR High Yield Bond ETF (JNK) is up .4%. But long-term Treasury bonds are slightly lower. The 10-year Treasury yield is unchanged at 2.38%. Remember, two weeks ago the 10-year was at 2.63%. So volatility is high in parts of the fixed income market as well. 

US home prices rose 5.87% y/y in January according to the Case-Shiller Home Price Index for the 20 largest US metro areas. Prices have accelerated a bit over the last 6 months and 5.87% is the highest y/y rate since 2014. Bloomberg reports the index has come all the way back to pre-recession 2006 peak levels. One big reason prices continue to rise is a very small pool of homes for sale. So while renting is now an extremely expensive proposition, rising home prices are making it tough to buy as well.   

The Conference Board’s Consumer Confidence Index surged to 125.6 this month, the highest level in 16 years. This is a survey measuring how consumers feel about present and future economic conditions. The election seems to have had a very positive effect on confidence, as well as steady improvement in the labor market and strong stock market gains. More respondents indicated plans to buy cars and major appliances. 

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