New York - Washington letter, week beginning March 28
- What happened last week?
The U.S. stock market closed higher last Monday as the Dow Jones industrial index recorded seven consecutive daily gains for the first time since October 2015, and S&P 500 saw its highest level since December last year.
However, the stocks were in turmoil after Tuesday. The Brussels attacks on Tuesday and the weekly crude oil inventories rising three times more than expectations on Wednesday negatively impacted the U.S. stock market. The stock market ended the remaining days of the weeks mixed and the hares of energy companies were hit.
The unexpected crude inventory rise in the U.S. also negatively affected oil prices. The price of crude oil plummeted by 4 percent on Wednesday, and was in decline for the remaining of the week. This reversed gains of the past week when the market had high hopes on April 17 with the meeting between Saudi Arabia and Russia to freeze production levels in order to curb oversupply in global oil market.
On an interesting note, The Rockefeller Family Fund announced Wednesday that it will divest from fossil fuels as fast as possible, and slammed the U.S. energy giant ExxonMobil -- a successor to oil magnate John D. Rockefeller's Standard Oil.
Although the decision might have seen John D. turning in his grave, the family fund pointed out to the effects of hydrocarbons on climate change and environmental concerns. Standard Oil of John D. Rockefeller, the company of a self-made man who had built an oil empire beginning from the third quarter of 19th century, was shattered into pieces by the U.S. government in 1911 for being a monopoly.
- U.S. macroeconomic data
Existing home sales in the U.S. for the month of February decreased to their lowest level in the last three months, while new home sales in the U.S. increased by two percent during the month of February, falling below expectations of a 3.2 percent increase.
Despite the data, St. Louis Fed President James Bullard signaled Thursday that the Federal Reserve's next interest rate hike could come sooner than expected. He noted that the Fed's decision to keep interest rates unchanged could hurt its credibility. The bank indicated last December that it could have four rate hikes this year, but that was trimmed to two last week during its quarterly meeting.
- The week ahead
Undoubtedly, this week's biggest focus will be the Fed Chair Janet Yellen's speech on Tuesday. Although Yellen is known for her lack of clarity in her comments on rate hike decisions, her views on domestic data and the overall well-being of the U.S. economy could give hints about the bank's rate move on April.
In addition, both the global crude and U.S. stock market will give higher weight on American weekly oil inventory data on Wednesday after last week's unexpected rise that posed high downward pressure on oil prices.
Moreover, any positive statement from OPEC countries and Russia could move oil prices up this week as the April 17 meeting looms. Saudi Arabia and Russia will meet next month to materialize a two-month discussion proposing a production freeze. The global crude market awaits a solid move from the heavyweights to trim some of the glut of supply.
And Friday will be the next biggest day in the U.S. as two significant macroeconomic data will be announced -- the non-farm payroll and unemployment rate. While non-farm payrolls are expected to have risen by 205,000 in March, against 242,000 in February, the unemployment rate is forecast to stay steady at 4.9 percent in March, compared to the month before.
Other macroeconomic data to be announced this week will include pending home sales for February on Monday, the consumer confidence for March on Tuesday, weekly initial jobless claims on Thursday, and University of Michigan's consumer sentiment for March on Friday.
In addition, the Fed New York head William Dudley and the Fed Dallas head Robert Kaplan will make speeches on Tuesday about the U.S. macroeconomic outlook and their take on the overall economy, which could hint at the bank's next move on a rate hike.