U.S. markets finished higher on Friday but closed the week with losses as Wall Street prepares for this week’s two-day Federal Open Market Committee meeting that starts on Tuesday.

The Fed is widely expected to deliver the first rate increase of 2018 under Fed Chairman Jerome Powell’s first as chairman of the central bank.

While the market may have fully priced in a quarter-percentage point rate increase, traders will parse the wording of the accompanying statement and Powell’s subsequent news conference for clues on market direction afterwards.

The Nasdaq closed in the green by a quarter-point, or 0.00%, after reaching a late day peak of 7,514 but closed below the 7,500 level for the third-straight session.

The Russell 2000 showed the most strength after advancing 0.6% and testing a high just south of 1,589 but closed below the 1,600 level for the 4th-straight session. For the week, Tech gave back 1% while the small-caps dropped 0.7%.

The Dow climbed 0.2% after testing to a high of 25,031 with resistance at the 25,000 level holding for a second-straight session.

The S&P 500 also added 0.2% after making an intraday run to 2,761 while closing back above its 50-day moving average and snapping a four-session losing streak. For the week, the Dow fell 1.6% while the S&P 500 stumbled 1.3%.

Utilities and Energy rose 0.9% to led sector strength while Real Estate and Industrials were up 0.5%. Consumer Staples and Technology dipped 0.1% to pace sector laggards on Friday.

Utilities jumped 1.7% for the week while Real Estate rallied 0.9% and were the only sectors that showed gains. Materials tanked 3.5% and Financials fell 2.8% and were the worst performing sectors.

Global Economy – European markets ended a choppy session while closing higher on Friday following revised economic data over eurozone inflation.

Germany’s DAX 30 climbed 0.4% while UK’s FTSE 100, France’s CAC 40 and the Belgium20 advanced 0.3%. The Stoxx Europe 600 climbed 0.2%.

ECB Executive Board member Praet said policy makers have been surprised by the number of people joining the workforce, which may mute the upward pressure on wages and therefore inflation.

He said he would not want to revise guidance too early, because that could send wrong signals about the end of the ECB’s net asset purchases.

Eurozone February CPI was unexpectedly revised lower to 1.1% year-over-year from the originally reported rise of 1.2%, the smallest pace of increase in 14 months. February core CPI was left unchanged at 1% year-over-year.

Eurozone Q4 labor costs rose 1.5% year-over-year, a slower pace than the 1.6% increase in Q3.

Asian markets settled mixed on Friday against a backdrop of more political rumblings globally. Japan’s Nikkei and China’s Shanghai fell 0.6% while Hong Kong’s Hang Seng slipped 0.1%.

Australia’s S&P/ASX 200 gained 0.5% and South Korea’s Kospi was up 0.1%.

Japan January industrial production was revised lower to a decline of 6.8% month-over-month from the originally reported drop of 6.6%, and the biggest monthly decline in nearly 7 years.

January JOLTS Job Openings came in at 6,312,000 and easily topping forecasts of 5,800,000.

Housing Starts fell 7% to a 1.24 million rate in February, while building permits dropped 5.7% to a 1.3 million rate, both of which were worse than expectations of 1.28 million and 1.32 million rates, respectively.

Industrial production grew 1.1% month-over-month in February, topping expectations for a 0.4% increase.

The University of Michigan consumer confidence index rose to 102 in the preliminary reading for March, above forecasts for a slip to 98.8 and below February’s reading of 99.7.

Atlanta Fed’s Q1 GDPNow estimate was trimmed again to 1.8% from 1.9%, continuing to veer below the 2.5% Blue Chip economist consensus. The nowcast of Q1 real private fixed-investment growth increased from 2.4% to 3.3%.

Baker-Hughes reported the U.S. rig count was up 6 rigs from last week to 990, with oil rigs up 4 to 800, gas rigs up 1 to 189, and miscellaneous rigs up 1 to 1.

The U.S. Rig Count is up 201 rigs from last year’s count of 789, with oil rigs up 169, gas rigs up 32, and miscellaneous rigs unchanged at 1. The U.S. Offshore Rig Count was unchanged at 13 rigs and down 6 rigs from last year’s count of 19.

Market Sentiment – Fed funds futures market expects three rate increases by the end of the year, with a more than a 30% chance of four.

Fedspeak will mostly be crowded out by the FOMC meeting and the accompanying blackout period. Fed Atlanta’s Bostic is scheduled to make comments on the economic outlook.

Minneapolis Fed Kashkari will take part in a Q&A session on Bloomberg Friday, while Boston Fed Rosengren will speak about monetary policy.

The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in five session following Friday’s pullback to $119.55. Upper support at $119.50-$119 held with risk $118.50-$118 on a move below the latter.

Resistance remains at $120-$120.50 and a downtrending 50-day moving average. A close above $121 would be a slightly bullish development.

RSI is back in a downtrend after failing resistance near the 60 level. Near-term support is at 50 with a move below this level leading to 40 and late February and March support.

Market Analysis – The Russell 3000 Index ($RUA) snapped a 3-session slide following Friday’s push to 1,634. Lowered resistance at 1,635-1,640 with additional hurdles at 1,650-1,655.

A close back above 1,660 would be a very bullish development. Near-term support is at 1,625-1,615 and the 50-day moving average with a close below the latter being a slightly bearish development.

RSI is trying to hold support at 50 with a move below this level being a slightly bearish development for another backtest to 45-40. Resistance is at 60.

The Consumer Discretionary Select Spiders (XLY) declined for a 4th-straight session with Friday’s low tapping $105.17.

Near-term support at $105-$104.50 and the 50-day moving average. A close below $104 would be a bearish signal. Resistance is at $105.50-$106 followed by $107-$107.50.

RSI has been consolidating near support at 50 with a close below this level leading to a possible backtest to the 45-40 area. Resistance is at 60 that represented February’s peak.

The percentage of S&P 500 stocks trading above the 50-day moving closed Friday at 48.21% with near-term resistance at 50%-55%. A close above the 60% level would be a bullish development. Support is at the 40% level.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average is currently at 75.49% and Friday’s high.

Early February resistance is at 76%-78% followed by 80% and January support levels. A close below 70% would be a slightly bearish development.

All the best,
Roger Scott