Stock Market 3/18/16 – Factors Causing the Stock Rebound

Stock Market 3/18/16: The sectors leading the rebound

Stock Market 3/18/16: The factors causing the stock rebound are complex.  One of the reasons given by analysts is the slowdown in interest rate hikes by the Federal Reserve.  Other reasons are lower unemployment, signs of inflation and more. See the details on how the market has improved since the start of the year.   geralt / Pixabay

Status of the Stock Market on March 18, 2016

Dow Jones Industrial Averages:

End of 2015:  17,425.03

March 18, 2016: 17,602.30  (+177.27  or +1.02 percent change this year)

52 Week High:  18,351.40  (-749.10 which is -4.08 percent below 2015 high)

S & P 500:

End of 2015:   2,043.94

March 18, 2016:  2,049.58  (+5.64 or +0.28 percent change this year)

52 Week High:  2,134.72  (-85.14 which is -4.0 percent below its 2015 high)

NASDAQ:

End of 2015:  5,007.41

March 18:  4,795.65  ( -211.76 or -4.23 percent change this year)

52 Week High:  5,231.94  (-436.29 which is -8.34 percent below its 2015 high)

Factors Causing the Stock Rebound

After suffering through the worst January in stock market history, stocks have been rebounding over the past five weeks.  The Dow and S&P 500 are both back in positive territory for the year, although still below their 2015 highs.  The Nasdaq remains negative for the year, but it has also improved.

Despite improvements in the overall markets, healthcare and biotech stocks continued to lag behind other sectors until now.  However, on Friday, March 18, they began to turn around, as well.  In fact, on Friday alone, seven of the ten major S&P sectors were higher, led by a 1.21 percent rise in the healthcare sector.

What are some of the reasons the stock market rebounded? Many analysts believe that these are the reasons for the improvement in the market:

  • The decision by the Federal Reserve at their March meeting to slow down the speed of interest rate hikes for 2016, probably limiting them to just two, definitely brightened the outlook of analysts.
  • Investors are beginning to see signs of inflation and there seems to less fear of another recession.
  • Single family housing starts rose to the highest level since November, 2007.
  • Manufacturing in New York expanded for the first time since July 2015.
  • Oil prices have improved.  In fact, West Texas Intermediate crude oil prices were up 6.9 percent during the past week.
  • Healthcare companies and bank stocks show signs of recovering from some of their recent losses.
  • The unemployment rate has dropped.  This has given people the confidence to quit their current jobs and seek better ones.
  • Our markets have also gotten help from overseas.  This week, the Bank of England voted to leave their benchmark interest rates unchanged.  The Eurozone Central Bank lowered their interest rate and hinted they could lower it more later in the year.
  • Cuba eliminated the 10 percent tax on U.S. dollars entering their country.  This could encourage foreign investment from the U.S.

Of course, not all market news is ever positive.  There continues to be a great deal of concern over the future of oil prices, particularly since Iran has refused to go along with the idea of freezing production levels. Emerging markets are also struggling, with Brazil as a perfect example:

In addition, as you can see in the chart below, some asset classes continue to struggle.

Which Asset Classes Have Done the Best Over the Past Decade?

The chart below shows which classes of assets have done the best and the worst, since 2006.  This chart was released earlier this week.  The key at the bottom shows that Managed Futures have done the best so far in 2016, while Small Cap stocks and Commodities, as well as other asset classes, are still struggling.

Significant Events and Economic Reports in April

  • April 1 – Employment Situation for March 2016
  • April 5 – Job Openings and Labor Turnover Survey for Feb. 2016
  • April 8 – America’s Young Adults at 29: Labor Market Activity, Education, and Household Composition
  • April 14 – Consumer Price Index for March 2016
  • April 22 – Employment Characteristics of Families Annual 2015 report
  • April 28 – College Enrollment and Work Activity of High School Graduates Annual 2015 report
  • April 29 – Employment Cost Index First Quarter 2016

Resources:

http://www.bls.gov/schedule/news_release/201604_sched.htm

http://www.breakingnews.com/ and yahoo.com/finance

Charts and statistics from: https://twitter.com/StockTwits and CNNMoney

http://finance.yahoo.com/news/us-stocks-healthcare-financial-stocks-165803263


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