On Monday, Dow Jones Industrial Average posted a four-day winning streak as it advanced 65.23 points to 25, 910.10. Apple rising 1% was counterweighted by Boeing’s recent losses. Nasdaq Composite gained 0.3 percent, which is near 7,714.48 as per Amazon’s rise over 1.5%. With a 1% rise from both the financial and energy sectors, S&P closed at 2,832.94 which is 0.4 percent higher.
As Amazon and Apple outperformed, the gains were held back by Boeing and Facebook who are both in the midst of issues. Investors are also preparing for an eventful week underscored by a major meeting with the Federal Reserve.
After the report from The Wall Street Journal of the scrutiny from the Department of Transportations and federal prosecutors regarding the development of Boeing’s 737 Max planes, the company fell more than 1.5%. These all came following last week’s Ethiopian Airline crash that involved a 737 Max 8 jet.
Meanwhile, shares from Facebook falls 3.3% after Needham’s analyst relegated Facebook from buy to hold. They cited that the change was due to concerns regarding the company’s changes in privacy and message encryption. In addition, there is also the likelihood of another regulatory scrutiny.
The investors are bracing for a busy week while the Federal Reserve commenced with the monetary policy meeting on Tuesday that will last for two days. CME Group’s tool, FedWatch, shows zero rate hike on market expectations. Investors are also looking for signs from the economic outlook of the central banks.
From their last meeting at the end of January, the Fed hinted that they would be patient with raising rates. The 2-year Treasury note generated trade around 2.4%, down from the 2.6% early this year. The benchmark 10-year note also came down from its previous 2.78% to 2.6%.
Chief U.S. economist, Steven Blitz of TS Lombard stated that the arrival of easier money from the Fed and central banks would raise the equity market. However, it might not last long because of the negative impact on earnings expectations of the flagging trends in the economic data from the U.S. and around the globe.
Blitz also cited that during the FOMC members’ meeting, they will discover that the temporary yield relationship from their previous meeting in January still cautions lower growth regardless of their intensive efforts which included the assurance of finishing balance sheet reduction quickly.
The U.S. and China Trade Deal Discussions
The optimism towards the U.S. – China trade deal is helping stocks to go higher. Both countries are expected to strike the trade deal in the middle of March and April. S&P 500 is already up 13% this year, on their way to posting the highest quarterly gain ever since 2009’s third quarter.
Credit Suisse’s chief U.S. equity strategist Jonathan Golub raised his target for the S&P 500 from 2,950 to 3,025 for 2019. His change in target suggests a 20% upside for the S&P 500. He noted that the receding risks would push the stocks higher.
With less aggressive remarks from the Fed, diminishing fears of inflation and recession, and the possibility of resolution on the trade issues with China, these factors will ultimately drive volatility and spreads lower, thus pushing the stocks to go higher.