Positive Action on Expanding Volume: 5 Weeks of Gains.

As expected, the final two trading days of last week were dominated by economic data and quadruple witching. We certainly received plenty of it. The Weekly Jobless data was fractionally better than expected coming in at 265k versus the expected 270k. The prior weeks claims were revised -19k.

The Philadelphia Fed Business outlook for general conditions was a resounding 12.4. Consensus was calling for a negative reading of 1.4. Consumer Sentiment, released Friday morning, was 90.0 for the prior month, a bit weaker than the 92.2 consensus.
The Atlanta Fed Business Inflation expectations reading was 1.8%.

All in, our most recent economic data, as framed by last week’s results, was supportive of the interest rate narrative as laid out by the Fed in the FOMC Announcement Meeting on Wednesday.

As is frequently the case in the period surrounding FOMC Meetings, both at the conclusion of last week and at the outset of this week we hear from Fed officials. On Wednesday of last week of course Fed Chair Janet Yellen had her post FOMC press conference. Friday we heard from William Dudley, Eric Rosengren and James Bullard. This week we hear from Jeffrey Lacker, Dennis Lockhart, James Bullard (twice), Charles Evans and Patricia Harker.

Friday saw markets add to recent gains with the added imprimatur of expanding volume. The Dow Industrials gained 0.67% while the S&P 500 and Nasdaq added 0.42%. Volume, as is normally the case on quadruple witching, expanded aggressively on the Nasdaq (+12.72%) and NYSE (+36.1%). The financial sector was the leader on the day gaining 1.73%. The fuel for the move came from the balanced FOMC Announcement in conjunction with a steady stream of constructive economic data. As business conditions continue to improve around the country and as the likelihood of a tick or two higher in rates seems more likely, financials stand to gain handsomely. The energy sector (+0.49%) also posted a modest gain on the day despite a slight dip in the price of crude WTI (-1.8%). Crude had closed the session on Thursday at $40.20/bbl but, as I have suggested would be the case, ran into some resistance.

This week’s focal points for investors, away from the aftermath of the FOMC Announcement and data, will be APPL, NKE and KBH. Today, APPL is making a new product announcement which is expected to include a small iPhone CNN Money. NKE reports quarter earnings Business Insider. KBH, the California based home builder, is expected to report Q1 earnings as well after market close on 3/23 Zacks.

Will the rebound in equity prices continue after five consecutive weekly gains? After all, the Dow Industrials are finally positive for the year after the worst start in history. Is the market due to take a pause? I would suggest, yes. However, I also believe that, given the economic data we have been treated to as well as the balanced approach to risks being taken by the Fed, any pause that does materialize this week will likely be shallow and lack institutional conviction on the sell side. If a pause does materialize it may well be the pause that refreshes. The largest hurdle on the horizon for our rebound from the February 11 lows comes in the form of Q1 corporate results. Earnings season is still three weeks away.

flickr photo: absoluteSteven