Stocks Close Sharply Lower on Last Trading Day of 1Q
The U.S. equity markets closed the final trading day of 1Q with steep losses, giving back most of yesterday’s large gains. Stocks declined as some divergent domestic economic data showed an advance in Consumer Confidence and a rise in U.S. home prices, while some regional manufacturing activity improved but remained in contraction territory.
Treasuries were mostly higher along with the U.S. dollar, while gold and crude oil prices were lower.
The Dow Jones Industrial Average declined 200 points (1.11%) to 17,776
The S&P 500 Index was 18 points (0.88%) lower at 2,068
Small and MIdcaps faired better than largecaps as the MidCap 400 lost .87% and the SmallCap 600 gave back .41% as the S&P 500 retreated by .88%.
The tech heavy Nasdaq Composite lost 47 points (0.94%) to 4,901
In moderately heavy volume, 938 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq
WTI crude oil slid $1.08 to $47.60 per barrel, wholesale gasoline declined $0.03 to $1.77 per gallon
The Bloomberg gold spot price decreased $2.07 to $1,184.01 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—increased 0.4% to 98.34
Consumer Confidence and home prices rise, while regional manufacturing output misses
The Consumer Confidence Index rose to 101.3 in March—the second highest reading since August 2007—from an upwardly revised 98.8 in February and compared to the Bloomberg estimate of 96.4. The upbeat confidence figure came as a solid month-over-month gain for the component pertaining to expectations of business conditions more than offset a decline in the present situation. Also, on employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—held steady at -4.8 last month.
The Chicago Purchasing Managers Index showed growth in Midwest activity improved but remained in contraction territory for the second-straight month, rising to 46.3 in March from 45.8—which was the first contraction reading (below 50) since April 2013—in February, and versus expectations of an improvement to 51.7.
The 20-city composite S&P/Case-Shiller Home Price Index showed a gain in home prices of 4.6% year-over-year in January, inline with estimates. M/M, home prices were up by 0.9% on a seasonally adjusted basis for January, above forecasts calling for a 0.7% gain.
Treasuries were mostly higher, with the yields on the 2-year and 10-year notes declining 2 basis points to 0.55%, and 1.93%, respectively, while the 30-year bond rate was nearly unchanged at 2.54%.
Tomorrow, the domestic economic calendar will heat up, with a couple reads on manufacturing activity, headlined by the ISM Manufacturing Index, projected to dip to 52.5 for this month, from 52.9 in February. Also, Markit will release its final Manufacturing PMI Index for March, expected to be unrevised at the preliminary report’s 55.3 level, but up slightly from 55.1 in February. Readings above 50 for both indexes denote expansion.
In the past 45 days vast swings have taken the market nowhere, as we have not had two up days in a row on the S&P 500 since early February. Mostly because uncertainty abounds and the market trades on any shred of news or noise that’s associated with Fed policy, economic surprises on the weak side, and earnings which have dropped into negative territory. However, two of the more timely and leading economic indicators—both of which saw better readings upon their most recent releases—are Markit’s composite purchasing managers index (PMI) and initial unemployment claims. Some next-level leading indicators have been signaling a turn for the better as well. We reaffirm our view that although the secular bull market that began in 2009 is not over; it’s likely to be a much choppier ride for investors until possibly earnings can catch back up to valuations.
Other items set for release on tomorrow’s domestic docket include ADP’s March private sector employment report, forecasted to display job growth of 225,000 for the month, construction spending, expected to show a 0.1% m/m decrease for February following the 1.1% m/m decline posted in January, and the weekly MBA Mortgage Applications report.
European stocks pare strong quarterly gains, Asia mixed to close out the quarter
The European equity markets finished lower, with the Stoxx Europe 600 Index paring some of its sharp quarterly rally. As noted in the Schwab Market Perspective: Will a Spring Thaw Lead to a Stock Surge?, the improvement in economic data combined with the European Central Bank’s quantitative easing (QE) announcement has appeared to help ignite interest in European equities from U.S. investors, and pushed Europe’s stocks back to all-time highs. Though, from the perspective of U.S. investors, in dollar terms the index still has a way to go to make a new high. Read more at www.schwab.com/marketinsight. Oil & gas stocks remained hamstrung, as the persistent pressure on crude oil prices continues, exacerbated by renewed oil supply concerns as Iranian nuclear talks, which could result in eased international sanctions and allow more crude oil to hit the markets.
In economic news, German retail sales declined by a smaller amount than expected for February, while U.K. 4Q GDP growth was revised higher to a 0.6% quarter-over-quarter pace of expansion. Also, the eurozone consumer price inflation estimate of a 0.1% y/y decline for March matched expectations, and was a slight improvement from the 0.3% decline posted in February. In other news, the eurozone unemployment rate came in at 11.3% for February, from the upwardly revised 11.4% in January, and compared to the 11.2% rate that was forecasted.
Stocks in Asia finished mixed amid some potential posturing to close out the quarter that has seen rallies in Japan and mainland China. Japanese equities fell, paring a double-digit quarterly gain for the Nikkei 225 Index, ahead of tonight’s 1Q Tankan survey, a key read on business conditions among the nation’s large manufacturers. Chinese stocks erased early gains that came from the announcement from the People’s Bank of China to lower the required down payment for second homes to 40% from 60%, while easing sales taxes for select homeowners.
The Shanghai Composite Index has rallied about 16.0% for the quarter, per Bloomberg, led by optimism that the government stands ready to deploy further stimulus measures to combat slowing economic growth. In Australia, a rebound in resource-related issues helped recover yesterday’s losses. South Korean equities advanced on the heels of a much stronger-than-expected rise in the nation’s industrial production for last month.