In what appears to be a common theme as of late, early gains for U.S. equities evaporated in the final hours of trading to finish at the lows of the day in another volatile session.
Investors appeared to remain skittish in the wake of yesterday’s first monetary policy testimony from Fed Chair Jerome Powell that fostered a hawkish takeaway.
News on the economic front was disappointing, as Q4 GDP was revised lower, and housing and manufacturing data fell short of forecasts.
Treasury yields pared a recent run and the U.S. dollar added to a rebound, while crude oil prices were lower following a bearish oil inventory report, and gold was little changed.
The Dow Jones Industrial Average fell 380 points (1.5%) to 25,029
The S&P 500 Index decreased 31 points (1.1%) to 2,714
The Nasdaq Composite declined 57 points (0.8%) to 7,273
In heavy volume, 1.1 billion shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq
WTI crude oil tumbled $1.37 to $61.64 per barrel and wholesale gasoline lost $0.06 to $1.92 per gallon
The Bloomberg gold spot price shed $0.27 to $1,318.09 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 90.63
Q4 GDP revised as expected, housing and regional manufacturing data misses
The second look (of three) at Q4 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 2.5%, down slightly from the first release’s 2.6% gain and matching the Bloomberg forecast. The revision reflected a slight downward adjustment to private inventory investment. Q3 GDP grew by an unrevised 3.2% rate. Personal consumption was unrevised at a 3.8% gain for Q4, above expectations of a 3.6% increase. Personal consumption grew by an unrevised 2.2% in Q3.
On inflation, the GDP Price Index was revised to a 2.3% increase, versus expectations of an unrevised 2.4% gain, while the core PCE Index, which excludes food and energy, was unadjusted at a 1.9% increase, in line with forecasts.
The GDP report is backward looking and tomorrow’s economic calendar will bring some leading indicators in the form of February auto sales, as well as the ISM Manufacturing Index, projected to dip to 58.6 this month from 59.1 in January, with a reading above 50 denoting expansion. ISM new orders—a leading indicator tracked by the Conference Board—will likely garner attention after stepping back in January from the fastest pace of growth in 14 years, while the prices paid component of the ISM’s report will also likely be on the market’s radar amid the heightened scrutiny of a potential rising inflation landscape.
Pending home sales fell 4.7% month-over-month in January, versus projections of a 0.5% gain, and following the downwardly revised flat reading registered in December. Sales were 1.7% lower y/y. Pending home sales reflect contract signings and possible impact of the recent rise in interest rates, while being a gauge of the pipeline of existing home sales, which unexpectedly declined in January.
The MBA Mortgage Application Index rose 2.7% last week, following the prior week’s 6.6% drop. The increase came as a 1.2% decline in the Refinance Index was more than offset by a 6.2% gain for the Purchase Index. The average 30-year mortgage rate remained at 4.64%.
Treasuries were higher, as the yield on the 2-year note ticked 1 bp lower to 2.25%, the yield on the 10-year note lost 4 bps to 2.87%, and the 30-year bond rate declined 5 bps to 3.13%.
Bond yields extended a rally and the greenback added to a recent string of gains yesterday following the first Congressional monetary policy testimony from new Fed Chairman Jerome Powell, which appeared to foster a slightly more hawkish takeaway. Tomorrow, Powell will conclude his Congressional testimony, speaking to the Senate Banking Committee. His remarks are not expected to differ significantly from yesterday’s speech, but the Q&A session that follows could generate a reaction as the market familiarizes itself with the new Fed Chief.
Other reports due out tomorrow include: personal income and spending, weekly initial jobless claims, construction spending, and Markit’s Manufacturing PMI Index.
Europe declines as recovery attempt short-lived, Asia sees some pressure
After a brief late-day attempt at a recovery, European equities finished back below the flatline on the heels of yesterday’s first Congressional monetary policy testimony from U.S. Fed Chairman Jerome Powell that appeared to foster a hawkish reaction and snap a rally in the U.S. The U.S. markets also struggled to hold a recovery as the markets remained skittish.
The euro and British pound finished lower versus the U.S. dollar, which is extending a bounce as of late. Bond yields in the region traded mostly to the downside. The declines came as economic data out of China and Japan disappointed, while reports in the region showed France’s Q4 GDP growth unexpectedly accelerated to a 2.5% y/y pace, and Eurozone consumer price inflation slowed in February. The German unemployment change fell more than expected for this month. Earnings results in the region continued to pour in and were mixed.
Stocks in Asia finished lower following the retreat from a recent rally in the U.S. yesterday that came courtesy of a flare-up in Fed rate hike concerns after Chairman Powell delivered his first Congressional monetary policy testimony that seemed to strike a hawkish tone. Also some disappointing data in the region further dampened sentiment.
Stocks in Japan dropped, as the nation’s retail sales and industrial production figures for January both fell more than expected. Mainland Chinese equities and those traded in Hong Kong fell, as the country’s official Manufacturing and non-Manufacturing PMI Indexes both showed growth slowed more than anticipated for this month. Markets in Australia, South Korea and India declined, with the latter releasing data after the closing bell, which showed the country’s Q4 GDP expansion accelerated more than expected to a 7.2% y/y pace.