Stocks dropped for the week after President Trump announced new steel and aluminum tariffs, instilling fears of a potential trade war, and Fed Chairman Mr. Powell reiterated to congress a gradual increase in short-term interest rates. Investors worry rising inflation from new tariffs and higher growth from the recent tax cuts could cause the Federal Reserve to move faster on raising short-term interest rates. In economic news, the labor market displayed further signs of tightening with initial jobless claims falling to 210,000, the lowest level since 1969. The industrials and materials sectors were the worst performing sectors as protectionist measures could cause rising input costs. In stock specific news, Berkshire Hathaway Inc. released its investor letter to shareholders. In the letter, Chairman and CEO Warren Buffett stated he does not see any companies worth buying at current valuations, but rather he favors returning capital through share buybacks. Shares of Gap, Inc. jumped after announcing better than expected comparable-store-sales with all three of its flagship brands reporting flat to positive growth for the first time since fiscal first quarter 2013. In contrast, Lowe's Cos Inc. announced disappointing results as weak gross margins drove a material earnings miss. Looking ahead to next week, Friday's unemployment report for February will be the key economic data point. The unemployment rate is expected to drop to 4% from 4.1% and wage growth is expected to come in at 2.8% year-over-year. Last month's strong uptick in wages sparked an increase in volatility and the market correction. Longer term, we continue to view the underlying fundamentals of the economy as the key driver of the stock market. If corporate profits remain strong, like the last two quarters, equities have room to run.
Posted on Monday, March 5, 2018 @ 8:18 AM
Posts are prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.