Dollars and Sense: Mixed news didn't dampen the markets

February rebound. After a rough January, the markets have been on a steady climb. The Dow rose more than 1,000 points in February, recovering all of January’s losses and then some. That growth came despite what I think you would have to call mixed economic news this week.

Oil and gas. We’ll start with oil. After several weeks of stable and rising prices, oil fell below $50 per barrel. We got a surprise last Wednesday when we learned crude oil inventories were more than double the quantity expected. With lower crude oil prices, oil and gas companies are cutting production investments, but lots of those cuts haven’t worked their way through the system. The surprise in inventories drove prices down yet again on Wednesday. But don’t expect that to last. Refineries are re-formulating for the summer, and prices have already started to rise.

Housing slowdown. Existing home sales slowed to their lowest rate in nine months, according to the National Association of Realtors. Sales of existing homes fell 4.9 percent between December and January. Housing stocks dropped when the news came out, but the broader markets mostly shrugged.

Yellen speaks. One news highlight for the week came from the testimony of Federal Reserve Chair Janet Yellen before Congress. Investors hoped her remarks would provide insight into when the central bank will begin raising its key interest rate from near zero. But that didn’t really happen. She said the economy was trending in a positive direction, though it still had a way to go to get back to full strength. She reiterated the Fed would be patient in raising interest rates. She didn’t give a lot of new information, but the markets generally took that as good news because it seemed to indicate the economy and the Fed are both going to stay the course for a while. The markets like that kind of steady-as-she-goes glide path.

Retail earnings. Earnings season is coming to an end, but retailers are bringing up the rear in fine fashion. Home Depot significantly beat expectations. Online college textbooks retailer Chegg also beat Wall Street estimates and saw its stock price jump significantly. Target, Lowe’s, and Dollar Tree all beat earnings expectations.

Jobs steady. First-time claims for unemployment benefits rose 31,000 to top the 300,000 mark. It’s generally not good news when this number rises, but the four-week average is still below 300,000, and even this level represents moderate to good labor market growth.

The week ahead. It will be a fairly busy week for government reports. We’ll get auto and truck sales this week, along with construction spending and about two dozen other reports. But none of them usually move the markets much. The one exception is the unemployment report, which comes out on Friday. Lat month, the unemployment rate ticked up a tenth to 5.7 percent. Most observers weren’t concerned by that, but if it goes up again, look for analysts to start asking why. We could see the markets paying more attention to the negatives than the positives in these mixed economic reports.

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