2 Min Market Summary: 22 Mar 2019

The Philadelphia Fed Index jumped to 13.7 in March (consensus 6.0) from -4.1 in February.The key takeaway from the report is that it was accented by a pickup in new orders and a moderation in price pressures, which is the type of combination that has convinced the Fed to be patient before making any policy rate changes.

U.S. Treasuries closed roughly unchanged. The 2-yr yield and the 10-yr yield remained at 2.40% and 2.54%, respectively, although the 10-yr yield kissed 2.50% at its best level in morning action. The U.S. Dollar Index rose 0.7% to 96.41. WTI crude lost 0.4% to $59.95/bbl.

US-China trade talks are going nowhere fast. The US will be sending Mnuchin and Lighthizer to China next week for more trade talks but with reports that Trump wants China to double or triple their purchases of US goods, an agreement still appears far away. 

The BoE voted unanimously to leave interest rates unchanged (0.75%) and said Brexit could prompt policy moves in either direction. They also warned that employment growth could moderate significantly as more companies trigger no-deal Brexit plans. The central bank said “gradual, limited tightening is probably needed.” UK retail sales also beat expectations, rising 0.4% against a forecast for a 0.4% drop. Unfortunately, nothing matters more than the Brexit process. Under the EU’s plan, if the House of Commons passes the divorce deal, Britain will leave the EU on May 22. But if May’s agreement is once again rejected, the UK will be get an unconditional Brexit delay until April 12 to bring new proposals for a way out of the impasse. She’ll have until April 12 to decide whether to leave without agreement or request a much longer extension.  May, who had gone to Brussels seeking an extension until June 30, said she welcomed the council’s decision. She said she would return to the UK Friday, where she would “make every effort to ensure that we are able to leave with a deal and move our country forward.”

S&P 500 gained 1.09% on Thursday, bolstered by the notion of a dovish Fed and persistently low U.S. Treasury yields. Leadership from the S&P 500 information technology sector (+2.5%), driven by gains in Apple (AAPL 195.09, +6.93, +3.7%) and Micron (MU 43.99, +3.86, +9.6%), also helped carry buying momentum throughout the day. The S&P 500 closed at its highest level this year.

Ten of the 11 S&P 500 sectors finished higher, led by information technology (+2.5%), real estate (+1.8%), and consumer discretionary (+1.3%). Conversely, the financial sector lost 0.3%, pressured by concerns that the recent compression in spreads will lead to weak net interest margins for lenders.

Apple reclaimed its title as the world’s most valuable company after Needham upgraded the stock to Strong Buy from Buy and raised its price target to $225. Needham’s upgrade was the latest from a host of positive analyst coverage this month that has helped lift the stock 12.7% in March, including Thursday’s 3.7% gain.

Micron suggested a bottom could be close with an improvement likely coming at the back half of the year. That call helped investors overlook its disappointing fiscal Q3 guidance and helped spur buying interest within the Philadelphia Semiconductor Index (+3.5%).

In other earnings news, Conagra Brands (CAG 25.82, +2.92, +12.8%) and Darden Restaurants (DRI 116.11, +7.46, +6.9%) were some of the biggest gainers in the S&P 500 following their earnings reports.Shares of Biogen (BIIB 226.88, -93.71), on the other hand, plunged 29.2% after the company said it will discontinue its Phase 3 trials of aducanumab for Alzheimer’s. Separately, Levi Strauss (LEVI 22.41, +5.41, +31.8%) became the biggest IPO in 2019 Thursday, opening at $22.22 after pricing its IPO at $17.