Stocks Close Lower to Round-Out Week
U.S. stocks finished the regular trading session lower, but were nicely higher for the week and posted a strong quarterly advance.
In economic news, a rise in personal income for February matched expectations, while personal spending missed estimates and consumer sentiment was revised to a lower-than-expected level.
Treasury yields dipped after rebounding yesterday and the U.S. dollar was nearly unchanged. Crude oil prices extended a recent recovery and gold managed minor gains.
The Dow Jones Industrial Average lost 65 points (0.3%) to 20,663
The S&P 500 Index shed 5 points (0.2%) to 2,363
The Nasdaq Composite was 3 points lower at 5,912
In moderately-heavy volume, 983 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq
WTI crude oil ticked $0.25 higher to $50.60 per barrel and wholesale gasoline gained $0.02 to $1.70 per gallon
The Bloomberg gold spot price rose $4.91 to $1,247.55 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 100.47
Markets were higher for the week, as the DJIA increased 0.3%, the S&P 500 Index advanced 0.8%, and the Nasdaq Composite rallied 1.4%
Personal income and spending mixed, consumer sentiment unexpectedly revised lower
Personal income was up 0.4% month-over-month in February, matching the Bloomberg forecast, and compared to January’s upwardly revised 0.5% gain. Personal spending ticked 0.1% higher last month, below expectations and January’s unrevised 0.2% gain. The February savings rate as a percentage of disposable income was 5.6%. The PCE Deflator was up 0.1%, matching expectations. Compared to last year, the deflator was 2.1% higher, in line with estimates. Excluding food and energy, the PCE Core Index was up 0.2% m/m, matching expectations, and the index was 1.8% higher y/y, above estimates of a 1.7% gain. January’s y/y figure was revised higher to a 1.8% increase.
The final March University of Michigan Consumer Sentiment Index was revised to 96.9 from the preliminary level of 97.6, where it was expected to remain. However, the index was up slightly compared to February’s level of 96.3. Compared to last month, the expectations component was unchanged, while the current conditions component moved higher. The 1-year inflation outlook declined to 2.5% from February’s 2.7% rate, and the 5-10 year inflation projection dipped to 2.4% from 2.5%.
The Chicago Purchasing Managers Index unexpectedly moved further into a level depicting expansion (above 50), after rising to 57.7 in March—the highest level since January 2015—from 57.4 in February, and versus expectations of a decline to 56.9.
Treasuries were higher, with the yields on the 2-year note and the 30-year bond declining 3 basis points to 1.26% and 3.02%, respectively, while the yield on the 10-year note declined 3 bps to 2.40%.
Bond yields rebounded yesterday, helping the stock markets gain ground as financials led the way, while the U.S. dollar extended a recent recovery.
Europe mixed, Asia mostly lower
European equities finished mixed, with basic materials and oil & gas issues pulling back from recent recoveries, exacerbated by a government shakeup in resource-heavy South Africa and the pause in the run in crude oil prices as of late. The global markets reacted to a plethora of economic data, while political uncertainty on both sides of the Atlantic continued to stymie conviction, amid U.S. President Donald Trump’s comments and expected actions on trade, while Brexit negotiations begin and a key French Presidential election looms.
Eurozone consumer price inflation came in below forecasts for this month, German retail sales rose much more than expected and U.K. 4Q GDP growth was unrevised. The euro and British pound moved higher versus the U.S. dollar, while bond yields in the region traded mixed. The Stoxx Europe 600 Index rose solidly this week, adding to a rally for 1Q and posting the best March performance since 2010, per Bloomberg.
The U.K. FTSE 100 Index fell 0.6% and Switzerland’s Swiss Market Index dropped 0.5%, while France’s CAC-40 Index gained 0.7%, Germany’s DAX Index advanced 0.5%, and Spain’s IBEX 35 Index and Italy’s FTSE MIB Index rose 0.6%.
Stocks in Asia finished mostly lower as the global markets digested comments from U.S. President Trump regarding upcoming trade negotiations with China and expected executive orders aimed at combating the trade deficit and tariff enforcement. Moreover, traders digested a plethora of economic data in the region, while posturing for the end of the quarter. Japan reported an increase in inflation and stronger-than-expected industrial production for February, though household spending fell more than anticipated. China’s government reads on manufacturing and services sector growth for March both showed acceleration.
Japanese equities declined despite an extension of weakness in the yen, while mainland Chinese shares rose, but those traded in Hong Kong finished lower. South Korean stocks traded to the downside, while a pullback in oil & gas issues from a recent run weighed on Australian securities. Indian listings dipped, snapping a string of gains.
Stocks post solid weekly gain to close out quarterly rally
Stocks closed out a solid quarterly advance with a respectable rebound from recent pressure, showing some resiliency in the face of festering political uncertainty, which was exacerbated by last week’s failed healthcare reform bill. Energy issues led the way as crude oil prices snapped back from a recent tumble on the heels of some bullish inventory data and speculation of an extension of OPEC’s production cut agreement, per Bloomberg. Stocks were also bolstered by an unexpected jump in Consumer Confidence to the highest level since December 2000 and a stronger-than-expected final read on Q4, as well as comments out of Washington suggesting the healthcare hiccup would likely not derail efforts on tax reform and infrastructure spending. Financials also contributed to the week’s gain as the drop in Treasury yields showed some signs of stabilizing. The U.S. dollar rebounded on the economic data and some hawkish commentary from a Fed official.
The stage is set for next week’s heavy dose of data, to see if economic optimism can continue to counter political uncertainty. The ISM and Markit will deliver their March reads on manufacturing and key services sector activity and the Fed will release the minutes from its meeting that yielded a rate hike earlier this month, while the trade balance, monthly auto sales and factory orders are likely to garner attention. However, the headlining event will close out the week, courtesy of Friday’s March non-farm payroll report.
The modest downward pressure on stocks recently appears to be working off some overly optimistic sentiment. We view this as a healthy pause in an ongoing bull market. U.S. political realities and the failure of healthcare reform contributed to the recent pullback in stocks but investors shouldn’t get discouraged. Economic data has hooked up—notably business confidence, which has led to a pickup in capital spending. The official Brexit process has begun, and although a recession doesn’t appear imminent, risks have risen and volatility will likely rise.