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Equites rallied as oil climbed to a 2016 high after Iraq’s oil minister said major OPEC and other producers will meet possibly next month is a new push to freeze output.  US crude output also fell more than expected to the lowest level since October 2014.  Stocks also were buoyed by better than expected earnings results, results that were not overshadowed by some disappointments from large cap momentum growth issues.

Of the 69 S & P 500 companies that have reported 84% have beaten expectations while 58 exceeded sales.  The disappointments, technology and health or the must own momentum growth issues.

Treasuries tumbled yesterday as oil rose, as crude is now up about 62% from its February low.  The gap between yields on 10-year inflation indexed securities and equivalent Treasury notes, known to as the 10-year breakeven rates rose one basis points to 1.63%.  It fell to 1.2% in February, the lowest since 2009.  The wider the spread the greater the inflation fears.

Is the narrative changing where inflation may become the primary concern?  As noted many times, monetary velocity is hovering around its all-time lows of about 4x versus the historical average of 12x.  What happens if velocity accelerates?  Will demand pull inflation morph into cost push inflation, the type of inflation that decimates purchasing power?

What will happen today?  How will weekly jobless claims and earning reports be interpreted?

Last night the foreign markets were mixed.  London was down 0.55%, Paris down 0.49% and Frankfurt down 0.36%.  China was down 1.23%,  Japan was up 2.70% and Hang Sang up 1.82%.

The Dow should open quiet.  Commodities are at a five month high, the result of surging oil prices and data supporting an improving Chinese and American economy. There are 36 S & P 500 companies posting results today and as expected results are exceeding dumbed down expectations.  The 10-year is off 6/32 to yield 1.87%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.