Last week was a rough week for the markets as just about every market that could go down, did. Possibly the one positive take away from the major markets was that the losses to the downside were limited with the greatest losses seen in the Dow Jones Industrial Average and the Emerging Markets which were down about half a percent.
The losses began on Monday in the S&P 500 as the Market dropped around a third of a percent and fell successively less with each passing day. The market found a bottom on Thursday as it reached the low of the week before reversing course to close ever so slightly higher. Finally, the market ended the week with a gain of a third of a percent to reduce the losses to less than half a percent.
The underlying sectors also saw red as the heaviest losses for the week was in Real Estate as concerns have emerged about the commercial real estate space. Numerous retailers including Macy’s, Sears which includes Kmart Stores, JC Penny, The Limited, American Apparel, Abercrombie and Fitch have all announced store closings nationwide. This was further marked with an exclamation point by the announcement by Gordmans Stores which filed for bankruptcy and plans to close all of their stores and liquidate their assets and inventory.
Meanwhile, the Green Street Commercial Property Price Index continues to hold steady at an all-time high for February.
Even the bond indices saw losses on the week as the various Bank of America indices were hit regardless of the duration or quality of bonds. The overall treasury yield curve crept up last week as the 10-year treasury closed at 2.58%.
Finally, on an economic front, the ADP Employment Report stunned analysts as the Wednesday reading came in over 100,000 above expectations at 298,000 compared to the 183,000 forecasted. This caused participants to look with baited breath to the Friday BLS Employment report which also beat expectations, although not to the same degree as the ADP Report.
Nonfarm Payrolls increased by 235,000 for the month compared to the 200,000 consensus while the Unemployment Rate fell from 4.8% to 4.7%.
As we are now hours away from the decision of this week’s Fed meeting, market participants are all but assured that the Fed Funds rate will increase by another 25 bpts as the FedWatch Tool closed out at 85% for the 75-100 bpts target.
Ultimately, we will have to wait to the Wednesday announcement to see if the expectations will be confirmed or if the next rate increase will be delayed further.