Market Insights 2/7/2019

U.S. equities finished solidly lower, as investor uneasiness surrounding global growth concerns on the heels of another dose of disappointing German data and tempered economic forecasts in Europe were exacerbated by increased trade anxiety following comments from National Economic Council Director Larry Kudlow that a “sizable distance” remains between U.S./China trade negotiations.

In economic news, jobless claims pulled back from last week’s jump and consumer credit was mostly in line with expectations.

Treasury yields were lower, as were crude oil prices, while gold and the U.S. dollar were higher.

The Markets…

The Dow Jones Industrial Average fell 221 points (0.9%) to 25,170

The S&P 500 Index declined 26 points (0.9%) to 2,706

The Nasdaq Composite tumbled 87 points (1.2%) to 7,288

In heavy volume, 946 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil lost $1.37 to $52.64 per barrel and wholesale gasoline shed $0.03 to $1.43 per gallon

The Bloomberg gold spot price increased $3.43 to $1,310.03 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 96.50

Jobless claims decline following last week’s jump

Weekly initial jobless claims fell by 19,000 to 234,000, versus the Bloomberg expectation calling for a drop to 221,000, with the prior week’s figure being unrevised at 253,000. The data recently likely has been impacted by the government shutdown and the four-week moving average rose by 4,500 to 224,750, while continuing claims dropped 42,000 to 1,736,000, north of estimates of 1,733,000.

Treasuries were higher, as the yields on the 2-year and 10-year notes, as well as the 30-year bond declined 4 bps to 2.49%, 2.65% and 3.00%, respectively.

After reaching lows in December, stocks have rebounded sharply, with strong breadth, as some of the worst fears appear to have subsided. But there are still uncertainties that are likely to cap near-term gains and/or lead to elevated volatility. Earnings season has been mixed, with the main message appearing to be slowing growth but no near-term recession. The Fed has turned more dovish and is likely on hold for a while, depending of course on incoming data. China’s economic slowdown is also causing concern, and the different way they are attacking the problem has generated more questions than answers.

There are no reports slated for release on tomorrow’s economic calendar.

Europe lower as economic concerns continue, Asia mixed

European equities were broadly lower, as economic concerns festered following disappointing earnings reports in the region, while a surprising decline in German industrial production followed a similar read on the nation’s factory orders yesterday.

The European Central Bank released its economic bulletin overview for February, noting that incoming data has continued to be weaker than expected, while the European Commission solidly downgraded its economic forecast for the Eurozone. Brexit uncertainty continued, with European and U.K. negotiators agreeing to have further talks as a March deadline looms, while the Bank of England (BoE) cut its economic outlook by the most since the 2016 referendum, per Bloomberg. The lowered outlook came as the BoE as expected kept its monetary policy on hold, with Governor Carney noting that the “fog of Brexit” is creating tensions and uncertainty to push down confidence. The British pound overcame early losses and was higher versus the U.S. dollar, after the BoE’s Carney suggested the prospect of further interest-rate increases remains on the table. 0% fall.

Stocks in Asia finished mixed as the U.S. markets snapped a recent string of gains, though volume remained lighter than usual with Chinese markets continuing to be closed for the Lunar New Year. Japanese equities declined, with the yen gaining some ground and earnings tilting to the disappointing side.