Markets Lose Steam Ahead of Data Deluge
U.S. stocks fell late in the day to finish the last day of 1Q mixed, as caution was palpable ahead of a flood of key data headlined by tonight’s Chinese business activity data and tomorrow’s key U.S. labor report and manufacturing releases.
Treasuries were higher amid the prudence, and as jobless claims surprisingly rose, while regional manufacturing activity jumped back into expansion territory.
Meanwhile, crude oil prices finished nearly flat after a choppy session, while the U.S. dollar was lower and gold gained ground.
The Dow Jones Industrial Average fell 32 points (0.2%) to 17,685,
The S&P 500 Index lost 4 points (0.2%) to 2,060, while
The Nasdaq Composite ticked nearly a point higher to 4,870.
In moderately-heavy volume, 997 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq.
WTI crude oil ticked $0.02 higher to $38.34 per barrel, wholesale gasoline was $0.02 lower at $1.45 per gallon and
The Bloomberg gold spot price rose $6.86 to $1,231.88 per ounce. Elsewhere,
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 94.62.
For the 1st Quarter, the DJIA increased 1.5%, the S&P 500 Index gained 0.8%, while the Nasdaq Composite lost 2.8%.
Jobless claims surprisingly rise
Weekly initial jobless claims rose by 11,000 to 276,000 last week, versus the Bloomberg estimate calling for claims to remain at the prior week’s unrevised level of 265,000. The four-week moving average increased by 3,500 to 263,250, while continuing claims declined by 7,000 to 2,173,000, south of the estimated level of 2,200,000.
The Chicago Purchasing Managers Index jumped back into expansion territory (above 50), rising to 53.6 in March from 47.6 in February, and versus expectations of an improvement to 50.7. New orders, employment and production all rose compared to the prior month.
Treasuries were higher, as the yields on the 2-year and 10-year notes, along with the 30-year bond, declined 4 basis points to 0.72%, 1.79% and 2.62%, respectively.
The headlining day of the U.S. economic week is poised for tomorrow’s releases of the nonfarm payroll report, the ISM Manufacturing Index, and Markit’s final Manufacturing Index for March. Job growth is projected to rise 205,000 after increasing 242,000 in February, the unemployment rate is expected to remain at 4.9%, and average hourly earnings are forecasted to rise 0.2% month-over-month, on the heels of the disappointing 0.1% dip for the month prior. The ISM is anticipated to show manufacturing output ticked back into expansion territory (above 50), rising to 50.9 from February’s 49.5 level, while Markit is projected to show a slight upward revision to 51.5 from 51.4, and above the 51.3 reading posted in February.
Federal Reserve Chairwoman Janet Yellen offered a mixed view of the economy as she delivered a dovish tone in her speech on Tuesday, highlighting the strong labor market, while pointing out that the manufacturing sector and net exports continue to be hard hit by slow global growth and the significant appreciation of the dollar. We continue to believe 2016 will be a year of heightened market volatility. Seemingly after the last 30 days investors have already forgotten the carnage that hit us from January 1st through mid-February. While the early weeks of the year the volatility was to the downside, the past month or so has seen that volatility on the upside. For now, the relief rally in risk assets remains intact, but the dollar, commodities, and economic data will be critical to sustaining it.
Europe lower, Asia mixed ahead of tomorrow’s U.S. and tonight’s China data
The European equity markets finished lower, giving back yesterday’s gains that followed dovish commentary from U.S. Federal Reserve Chair Janet Yellen, which eased concerns about a near-term rate hike. Oil & gas issues led to the downside, and financials saw some pressure, with the markets bracing for tonight’s key reports on manufacturing and services sector activity in China and tomorrow’s key U.S. labor and manufacturing releases. The euro traded higher versus the U.S. dollar and bond yields in the region were mixed. In economic news, German retail sales unexpectedly declined for February, while Eurozone consumer price inflation came in slightly hotter than expected for March. European stocks capped off a solid quarterly decline with banks coming under pressure on heightened concerns about bad loans, and as the European Central Bank’s (ECB) decision to deploy further stimulus measures was overshadowed by uneasiness regarding the central bank taking its deposit rate further into negative territory.
Stocks in Asia finished mixed as traders await tomorrow’s key March labor report and manufacturing releases out of the U.S., along with tonight’s releases of manufacturing and services reports out of China. Also, the global markets continued to digest Tuesday’s dovish tone from U.S. Fed Chair Janet Yellen. Japanese equities declined, with the Nikkei 225 Index capping off a dismal quarter which saw banks come under pressure as the Bank of Japan adopted a negative interest rate policy in February, while the yen rallied to exacerbate corporate earnings sentiment.
Mainland Chinese stocks ticked higher and those traded in Hong Kong dipped ahead of tonight’s business activity report, though stocks in the Asian nation have rebounded sharply this month as the country’s economic data and currency showed signs of stabilizing and central banks added further stimulus measures, per Bloomberg.
South Korean equities decreased, despite an unexpected jump in the nation’s industrial production for February. However, a rebound in banking stocks, which have come under pressure on a flare-up in concerns about the bad loans, exacerbated by the impact of the struggling resources sectors, helped boost Australian issues, while India’s markets finished flat.
While the manufacturing and services reports out of China will likely headline tomorrow’s international economic calendar, there are a slew of manufacturing PMI reports across Europe slated for release, as well as Japan, while other items on the docket include CPI and trade data from South Korea, auto sales from Japan, and the eurozone’s unemployment rate.