Markets Blink

As expected last week, the FOMC raised the fed funds rate by 25 bps on Wednesday and US equity markets posted a largely flat weekly performance. If not for an investor focus on high dividend payers, utilities and REITs, equity markets would have lost ground. The most interest sensitive sector of the market, which should theoretically stand to gain the most from higher rates, financials, actually lost ground on the week (XLF -1.17%). As counterintuitive as it may seem, even the US 10-year yield actually ticked lower as well (-7.3 bps). As I pointed out in last Monday’s note and on Yahoo Finance on Tuesday, March’s interest rate move by the Fed was widely expected and already “baked into” equity prices. For the week the S&P 500 gained a scant 0.2% while the Dow Jones Industrial Average closed out the week unchanged. It is time to turn the page on the FOMC – at least for the next 2 months. We, however, will continue to keep a close eye on our weekly economic releases.

Reuters Update: Slide in U.S. infrastructure stocks sign of ‘Trump trade’ weakness

Steel shares, which soared just after the Nov. 8 election, fell sharply this week and are down for the month of March. Also, the S&P 1500 construction and engineering index .SPCOMCSE is down 3.6 percent so far for March.

Along with financials, those names helped lead a post-election U.S. stock market rally, fueled by Republican Donald Trump’s promises of increased infrastructure spending, tax reform and reduced regulations. The S&P 500 .SPX remains up 9.8 percent since the vote.

But signs that Republicans are facing difficulties uniting their majority behind a bill to replace Obamacare have caused investors to question how soon Trump’s pro-growth policies may be implemented.

“Transports are the lifeblood of the economy; they are the unsung heroes of the bull market,” said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York.

“They need to hold up in order to continue to provide validation to the broader trade, to the trade higher,” he said, adding that he saw more room on the downside for transports and infrastructure stocks, largely because of the run up. More:

By Chuck Mikolajczak and Caroline Valetkevitch | NEW YORK

Last week’s economic data releases were largely in channel with consensus expectations with a decidedly positive tone. The NFIB Index for February came in at 105.3 only fractionally below the largest increase in its history in December of 2016. The PPI-FD M/M for February was 0.3% versus Bloomberg consensus of 0.1%. The Housing Market Index for March was 71 versus consensus of 66. The EIA Petroleum Status Report reflected a draw on inventories across all three verticals. Housing Starts jumped to 1.288M from the prior month’s upward revision to 1.251M. The only miss of significance came on Friday. Industrial Production for February was flat, consensus was calling for a gain of 0.2%.

Flickr photo: glasseyes view