Expecting lower volatility after the Fed

Market Overview Video Transcript

S&P 500 stock index closed last week 1.3% higher and for the first time in 2016 closed above the start of the year. The Dow index advanced 1.8% last week and Nasdaq added 1%. The US currency weakened for the second week in a row.

On Monday and Tuesday the US stocks were moderately volatile but closed little changed. The US dollar index edged up slightly. Investors expected the results of the next Fed meeting. No significant economic data came out on Monday in US. On Tuesday the February retail sales came out 0.1% lower falling short of expectations. Nevertheless, the very fact of their decrease was considered as negative. Most investors considered the consumers demand as weak and revised down the outlook for the US GDP in Q1 to 1.9%.

The Fed meeting and the following press-conference were the key events of the last week. The US regulator left the current interest rates unchanged and said they may be raised only twice this year instead of previously planned four rate hikes. Meanwhile, the global economic uncertainty remains the risk for the US economy. After that the US dollar tumbled while the stock prices soared. Market participants decided the weakening of the national currency shall support the US corporations. The additional growth factor was the 6% global oil prices increase that supported the stocks of the energy companies.

The same trends remained in the currency and stock markets on Thursday. The market reaction on the US Fed comments was so strong that investors shrugged off all macroeconomic data that came out during the week. The higher inflation and lower industrial production for February were among them. On Friday the March consumer confidence index by Michigan University fell which, in its turn, did not halt the US stocks growth.

The key day this week, in our opinion, is Thursday when the March Manufacturing PMIs will be released in Japan, Germany, Eurozone and the US. Moreover, the durable goods orders for February will come out on Thursday. Earlier this week the US real estate market data and some other indicators will come out. On Friday the second reading of the US Q2 GDP will come out. The indicator is significant but may have no effect on the markets as no its change from the first reading is expected.