Bulls dominated US markets last week, and 2016 losses have been erased. Further, rising crude oil prices and a positive jobs report led to a rally in stock markets. Markets were also buoyed by comments from Federal Reserve chair Janet Yellen on the pace of interest rates. In March 2016, non-farm payrolls rose 215,000, beating Wall Street’s estimate of 205,000 while the unemployment rate increased to 5%.
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Last week, Janet Yellen said that the central bank would raise interest rates with caution, given the risks to the global economy. Interest rates are a double-edged sword for the economy. Raising rates too soon may lead to a stock market collapse, so the Fed is better off waiting for stronger signals than acting in a hurry.
This week, investors will turn their attention to the minutes from the Federal Open Market Committee meeting as well as monetary policy decisions from India, Australia, and Poland. Further, the European Central Bank is also expected to release minutes from its March meeting on Thursday. In addition, markets are preparing themselves for the first quarter earnings seasons beginning from next week onwards.
Investors are awaiting earnings from the US financial sector (XLF) to determine the trajectory of economic growth. Weak oil prices and global volatility have hurt trading revenues in the first quarter. Major banks like Citigroup (C), JP Morgan (JPM), and Deutsche Bank (DB) have warned of weak earnings for the quarter. Further, tighter regulations continue to remain a challenge for US banks (KBE) as they struggle to remain profitable despite the high legal expenses.
Read on for a recap about how the financial sector performed last week.