As I write in my new weekly commentary, “Stocks Struggle as U.S. Economy Continues to Disappoint,” while volatility remains below the long-term average, it’s on the rise in both the stock and bond markets. This is due to somewhat mundane issues, including slower economic growth, disappointing earnings and anticipation of an eventual rate hike by the Federal Reserve (the Fed).
Market Realist – The last three months have seen subdued retail sales despite lower oil prices.
The graph above shows the unadjusted month-over-month growth in retail sales since the start of 2014. Retail (XRT)(RXI) sales started growing from March 2014. The growth sustained for most of 2014. However, retail sales have contracted in the last three months despite lower oil (USO) prices, which increases disposable income.
Bad weather has discouraged people from going to malls. Instead, they’ve preferred online shopping, which picked up by 2% in February.
While job creation has been robust, wage growth and the labor force participation rate have remained low.
Also, housing (IYR)(VNQ) starts dipped from ~1.1 million in January to ~900,000 in February. This decrease shows that consumption has been low in 1Q15 after growing by 4.3% in 4Q14, which was the highest growth rate since 2006.
Market Realist – Volatility has increased in both the stock and bond markets.
The graph above shows the 30-day volatility of the S&P 500 (SPY) and Treasuries, as tracked by the iShares Barclays 7-10 year Treasury bond ETF (IEF).
As we saw in the previous part of this series, the volatility in the stock markets has increased in 2015. This is true of bond volatility as well. While volatility was low for IEF in 2014, it has seen a sharp rise in volatility in 2015. This was mainly because of the probability of the rate hike. However, the fact that US Treasuries look relatively attractive for investors in Europe and Japan, due to extremely low yields in those economies, has been pulling yields down. Also, recent poor economic data have kept yields at bay.
The rally in biotech stocks has seen superior gains. The sector has seen tremendous growth over the last five years or so.
Tilray (TLRY) reported its quarterly earnings after the market closed. The company reported a total quarterly sales of $15.5, which increased nearly 203.8% year-over-year.
Earlier today, US tech giant Apple (AAPL) launched new versions of its iPad Air and iPad Mini. The company is set to hold a special event on March 25.
Facebook has stated that over 700 million of its users play games, watch gaming videos, and engage in gaming groups on its platform.
On March 18, President Trump tweeted, “GDP growth during the four quarters of 2018 was the fastest since 2005.” Let’s look at the data.
Today, Steel Dynamics released its first-quarter earnings guidance. It expects its first-quarter EPS to be between $0.88 and $0.92.
Amazon (AMZN) recently teamed up with the Yankees and other investors to purchase the YES Network.