State of the Stock Market Analysis for the Week Ending on March 18, 2018 Tough Week for Stock Market But Bulls Are Optimistic 3-18-18)

All You Need Is Jobs

The stock market closed higher on Friday, but that did not hide the fact that it was a tough week. The Dow was down 1.5%, the Nasdaq was 1.0% lower, and the S&P 500 finished the week 1.3% lower. It was a rough week, but the pullback was limited, and the bulls are looking for a rally as we head toward the latter part of March and early April. Economic news is good, which might pave the way for this bull market to continue.

On Friday, we saw that Consumer Sentiment for March was very strong, as it came in at 102.0 versus expectations of 99.5. It topped the previous 99.7, and it showed that consumers are in a positive mood right now. Industrial Production rose 1.1% in February, and that topped estimates of a 0.5% increase as well as the 0.1% decline we saw for January. This was one more of those “pluses” that we continue to see, so these reports ultimately help the stock market.

Another interesting report that we saw on Friday was the job openings number. It showed that 6.3 million job openings came into play in January, which was up in a big way from the previous 5.7 million level. This is a very bullish sign for the economy, and that is being reflected in the current strength in the stock market. The week might have been a down one for stocks, but the strong close we saw on Friday suggests that the stock market might be ready to head toward higher highs.

We get the “Fed Heads” meeting next week, and the odds are high for a quarter-point rate hike from Jerome Powell. The stock market will likely take a rate hike with a grain of salt, and we might even see stocks head higher. It has been a long road to “normalize” interest rates, but the Fed will continue to move toward this goal. Raising rates tends to make investors nervous, so we will see what happens.

Interest rate hikes are interesting, and we all remember what happened in 1999, when the Fed raised rates, perhaps “too far, too fast.” The March Meltdown of 2000 could have possibly been avoided, but it happened just the same. The Federal Reserve is in a similar position right now, so we will wait and see what the Fed has to say next week. A 25-basis point hike seems likely, so we will see what plays out with Jerome Powell and his crew.

The government situation in the U.S. will likely continue, but it is amazing that the stock market seems indifferent to the madness. Stocks are holding up well, which is a great sign. We will be back in action on Monday, so stay tuned. We have March Madness underway, and the Gorilla sends his best to those great college hoopsters! It is a great tournament, and may the best team win. Have a great weekend.

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