Monthly Archives: March 2018

U.S. Market Weekly Summary – Week Ending 03/30/2018

S&P 500 Posts 2.0% Weekly Gain in Broad Climb But Down 1.2% for Q1; Staples Lead Week’s Advance

The Standard & Poor’s 500 index rose 2.0% this week as the consumer-staples sector led a broad advance following last week’s tumble, but the market benchmark still ended Q1 down 1.2% from the end of Q4.

The index ended Thursday’s session at 2,640.87, up from last week’s closing level of 2,588.26 but down from its year-end 2017 closing level of 2,673.61. Thursday marked the last day of the trading week as well as the month and the first quarter, as the US stock market will be closed Friday for the Good Friday holiday.

This week’s rise in the S&P 500 marks its first weekly advance in three weeks and erases just a tiny portion of the index’s declines over the previous two weeks.

The consumer-staples sector rose 3.5% this week, marking the largest percentage gain of the week among the S&P 500′s sectors. Among its gainers, Altria Group shares added 5.1% this week as Deutsche Bank initiated coverage on the stock with a buy investment rating.

The real-estate sector posted the second-largest percentage gain this week, up 3.2%, followed by a 3.1% rise in telecommunications stocks. Every sector ended the week in the black versus last Friday’s market close.

The telecommunications sector’s climb came as HSBC upgraded its investment ratings on both AT&T and Verizon Communications to buy from hold. Shares of AT&T rose 2.7% this week while shares of Verizon Communications added 3.3%.

The energy sector was the weakest among the S&P 500′s sectors this week, rising just 1.0%.

Market Insights 3/29/2018

U.S. stocks rallied solidly to close out Q1 and the holiday-shortened week, shaking off the recent two-day tech-led decline amid ramped-up market volatility.

Treasury yields traded lower in a shortened session for the bond markets. Crude oil prices advanced and the U.S. dollar and gold were nearly unchanged.

The economic docket showed consumer sentiment remained at a 14-year high and personal income and spending rose in line with expectations.

Please note: All U.S. markets will be closed tomorrow in observance of the Good Friday holiday

The Markets…

The Dow Jones Industrial Average rallied 255 points (1.1%) to 24,103

The S&P 500 Index jumped 36 points (1.4%) to 2,641

The Nasdaq Composite surged 114 points (1.6%) to 7,063

In heavy volume, 923 million shares were traded on the NYSE and nearly 2.5 billion shares changed hands on the Nasdaq

WTI crude oil added $0.56 to $64.94 per barrel and wholesale gasoline was unchanged at $2.01 per gallon

The Bloomberg gold spot price was $0.22 higher at $1,325.23 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 90.06

Markets were solidly higher for the week, as the DJIA gained 2.7%, the S&P 500 Index increased 2.1%, and the Nasdaq Composite gained 1.1%

Personal income and spending match forecasts, consumer sentiment maintains multi-year high

Personal income rose 0.4% month-over-month in February, matching the Bloomberg forecast and January’s unrevised increase. Personal spending gained 0.2% in February, in line with expectations and January’s unrevised rise. The February savings rate as a percentage of disposable income was 3.4%.

The final March University of Michigan Consumer Sentiment Index was revised slightly lower to 101.4 from the preliminary level of 102.0, where it was expected to remain, and compared to February’s level of 99.7. The index remained at the highest level since January 2004, as a slight m/m dip in the expectations component of the survey was more than offset by a solid gain in the current conditions portion of the report. The 1-year inflation forecast dipped to 2.8% from 2.9% and the 5-10 year outlook remained at February’s 2.5% rate.

Weekly initial jobless claims declined by 12,000 to 215,000, versus expectations calling for a slight increase to 230,000, with the prior week’s figure being revised lower by 2,000 to 227,000. The four-week moving average dipped 500 to 224,500, while continuing claims rose by 35,000 to 1,871,000, just north of estimates of 1,870,000.

Treasuries were higher, with the yield on the 2-year note dipping 2 basis points (bps) to 2.27%, the yield on the 10-year note declining 4 bps to 2.74%, and the 30-year bond rate dropping 5 bps to 2.97%.

Treasury yields were lower and the U.S. dollar modestly extended a two-day gain, with the markets continuing to deal with last week’s Fed rate hike and slightly more hawkish outlook, lingering global trade uncertainty, and the ramped up volatility in the stock markets.

Europe and Asia mostly higher

European equities finished higher, with the tech sector getting a reprieve from a recent bout of pressure and leading a recovery from the two-day drop for the U.S. markets. The euro and the British pound dipped versus the U.S. dollar, while bond yields in the region finished lower. In economic news, German consumer price inflation came in a bit cooler than expected for this month, while U.K. Q4 GDP growth was unrevised at a 1.4% y/y pace.

We expect strong global growth to win out over the risks posed by high investor confidence, trade spats, Fed rate hikes and other concerns to result in a rewarding, but volatile year for investors.

Stocks in Asia finished mostly higher even as the U.S. markets continued to slide from Monday’s sharp recovery and the tech sector remained volatile due to user data privacy scrutiny. Japanese equities finished higher, showing some late-day resiliency after the recent softness in the yen helped counter a softer-than-expected read on the nation’s retail sales for last month.

Stocks in mainland China advanced nicely and shares trading in Hong Kong ticked higher, while South Korean equities also finished to the upside. Australian securities declined in the wake of some weakness in resource-related stocks. Indian markets were closed for a holiday.

Stocks chipped away at last week’s tumble

After falling sharply in the prior week, U.S. stocks snapped back to begin the holiday-shortened week, limiting the damage as the trade war concerns that led to the tumble eased courtesy of suggestions that the U.S. and China could be open working together to resolve trade issues. All the major sectors posted gains for the week, aided by some upbeat earnings reports and economic data showing Q4 GDP growth was revised higher than expected and consumer sentiment maintained a 14-year high.

Volatility continued to increase with market rallies book-ending a two-day decline as tech stocks fell amid festering concerns toward user data privacy and the consumer discretionary sector being hamstrung by a drop in Amazon on worries President Donald Trump may go after the retail giant. The U.S. dollar rebounded from last week’s decline and the yield curve flattened as the 10-year Treasury note rate fell below the 2.80% mark and the 30-year bond yield dipped under 3.0%.

Next week, Q2 will begin with a bang as the economic calendar will deliver a host of key data, commencing with the ISM Manufacturing Index and March auto sales, followed by the ISM non-Manufacturing Index, factory orders and the trade balance, while culminating with Friday’s March nonfarm payroll report.

Market Insights 3/28/2018

U.S. stocks closed a volatile session lower as the major indexes traded off between gains and losses multiple times throughout the regular session.

Treasury yields diverged and the U.S. dollar continued yesterday’s advance, while a relatively robust economic docket included an upward revision to Q4 GDP.

Pressure on tech stocks remained, and Amazon led the consumer discretionary sector lower following a report that the Trump administration may be considering changes to the e-commerce giant’s tax treatment, though the White House responded that there are no specific announcements, policies, or actions that it is currently pushing forward.

Gold and crude oil prices lost ground.

The Markets…

The Dow Jones Industrial Average declined 9 points to 23,848

The S&P 500 Index decreased 8 points (0.3%) to 2,605

The Nasdaq Composite fell 60 points (0.9%) to 6,649

In moderately-heavy volume, 929 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.87 to $64.38 per barrel and wholesale gasoline was unchanged at $2.01 per gallon

The Bloomberg gold spot price decreased $19.28 to $1,325.77 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly 0.9% higher at 90.14

Final revision to Q4 GDP tops forecasts, mortgage applications rise

The final look (of three) at Q4 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 2.9%, adjusted up from the 2.5% expansion posted in the first revision. This was above forecasts calling for an upward revision to a 2.7% pace of expansion. Q3 GDP expanded by an unrevised 3.2% rate. Personal consumption was revised to a 4.0% gain, from the previously-estimated 3.8% rise, where it was expected to remain, and compared to the unrevised 2.2% increase posted in Q3. In addition to the upward revision to personal consumption, a positive adjustment to private inventory investment also contributed to the stronger-than-expected pace of expansion in Q4.

On inflation, the GDP Price Index was unadjusted at a 2.3% gain, in line with forecasts, while the core PCE Index, which excludes food and energy, was also unrevised at a 1.9% increase, matching estimates.

The MBA Mortgage Application Index rose 4.8% last week, following the prior week’s 1.1% decline. The gain came as a 7.3% jump in the Refinance Index was met with a 3.1% increase for the Purchase Index. The average 30-year mortgage rate ticked 1 basis point higher to 4.69%.

The advance goods trade deficit unexpectedly widened to $75.4 billion in February, from the upwardly revised $75.3 billion in January, and versus expectations of a $74.4 billion shortfall.

Pending home sales rose 3.1% m/m in February, versus projections of a 2.0% gain, and following the downwardly revised 5.0% drop registered in January. Sales were 4.4% lower y/y. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales, which rose more than expected in February.

Treasuries finished mixed, with the yield on the 2-year note ticking 2 bps higher to 2.28%, the yield on the 10-year note flat at 2.78%, and the 30-year bond rate declining 1 bp to 3.01%.

Treasury yields diverged after yesterday’s decline and the U.S. dollar extended Tuesday’s advance in the wake of the heightened volatility surrounding last week’s Fed rate hike and slightly more hawkish outlook, wavering global trade concerns, and the ramped up volatility in the stock markets.

Tomorrow, reports from the U.S. economic calendar will include personal income and spending for February, estimated to have increased m/m by 0.4% and 0.2%, respectively, as well as weekly initial jobless claims, forecasted to have ticked higher by 1,000 to a level of 230,000.

After the opening bell, we’ll get a couple of more reads in the form of the Chicago Purchasing Managers Index, with economists expecting a reading of 62.0 for March versus the 61.9 registered in February, and the final University of Michigan Consumer Sentiment Index for March, forecasted to remain at the preliminary level of 102.0, which is a 14-year high.

Europe mostly higher, Asia falls following yesterday’s slide in for U.S. equities

European equities traded mostly to the upside, with the euro and British pound declining as the U.S. dollar extended yesterday’s gain on the heels of the upbeat GDP report across the pond, while the U.S. markets showed signs of recovery in afternoon trading.

However, the persistent downside volatility in the tech sector that led to yesterday afternoon’s drop in the U.S. kept gains in check, while global trade uncertainty remained a source of touchy sentiment. Bond yields in the region finished lower.

Stocks in Asia finished broadly lower in the wake of yesterday’s downside move in the U.S. that followed Monday’s sharp recovery. The tech sector led the drop and weighed on the markets in the region on festering uneasiness toward the group exacerbated by a Bloomberg report that the Trump administration is considering a crackdown on Chinese investments in technologies that the U.S. deems sensitive.

Japanese equities declined with the yen pausing from a recent bout of weakness. Stocks trading in both mainland China and Hong Kong dropped. Australian securities moved lower and Indian shares declined. South Korean equities traded to the downside amid the weakness in the tech sector and following a report that showed the nation’s Q4 y/y GDP growth came in below forecasts.

Random Thoughts

As if pulling petals from a daisy, investors appear to be pondering if the correction is over, not over, over, not over.

We believe the correction has likely run its course and is now working its jagged way back to breakeven.

We are encouraged that due to the recent price decline and anticipated gain of 18.6% in 2018 operating EPS, the S&P 500 is now trading at a forward 12-month P/E of 16.6X, which is just slightly above the 16.4X average since 2000.

In addition, Q1 results may serve as a salve to the recent chafing, since S&P 500 EPS are projected to rise 16.6%, up from the 14.5% recorded for the final quarter of 2017.

However, volatility should remain elevated, and we alert investors to a possible second slip into 5%+ territory after recovering from the first, since 40% of all calendar years experienced as many as four round-trips that shaved off more than 5% each.

Market Insights 3/27/2018

The U.S. equity markets were unable to add onto yesterday’s rally, as early gains on eased trade concerns succumbed to renewed pressure from technology issues and stocks finished solidly lower.

A pullback from a 17-year high in consumer confidence and a decline in regional manufacturing activity added to the mix.

Treasury yields were lower, as were crude oil and gold prices, but the U.S. dollar rebounded from Monday’s slide.

The Markets…

The Dow Jones Industrial Average declined 345 points (1.4%) to 23,858

The S&P 500 Index fell 46 points (1.7%) to 2,613

The Nasdaq Composite tumbled 212 points (2.9%) to 7,009

In moderately-heavy volume, 935 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.30 to $65.25 per barrel and wholesale gasoline was $0.01 lower at $2.01 per gallon

The Bloomberg gold spot price decreased $9.35 to $1,344.15 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 89.37

Consumer Confidence dips

The Consumer Confidence Index declined to 127.7 in March, from February’s downward-revised 130.0, versus the Bloomberg estimate of a modest rise to 131.0. The Index slipped from a 17-year high, as the Present Situation Index and the Expectations Index of business conditions for the next six months both declined. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—ticked higher to 25.0 from the 24.0 level posted in February.

The Richmond Fed Manufacturing Activity Index fell to 15 in March from 28 in February, versus estimates of a decline to 22, but a reading above zero denotes expansion.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 6.4% y/y gain in home prices in January, versus forecasts of a 6.2% rise. M/M, home prices were up 0.8% on a seasonally adjusted basis for January, above expectations of a 0.6% gain.

Treasuries finished higher, as the yield on the 2-year note decreased 2 basis points (bps) to 2.28%, the yield on the 10-year note dropped 6 bps to 2.78%, and the 30-year bond rate declined 4 bps to 3.03%

Treasury yields were lower after rising yesterday and the U.S. dollar recovered somewhat from Monday’s slide, with the stock markets failing to extend the sharp rebound that kicked off the holiday-shortened week.

The markets continue to grapple with last week’s rate hike and slightly more hawkish lean from the Fed and flared-up trade war concerns that appeared to ease yesterday, leading the snapback in stocks.

Europe and Asia higher as trade concerns cool and currencies slide

European equities saw widespread gains, with the euro and British pound giving back yesterday’s solid advances versus the U.S. dollar, while the global markets recovered from the recent tumble as trade war concerns appear to be easing. The worries on the global trade front have cooled as the U.S. and China look to be open to working together to resolve trade issues. However, we expect strong global growth to win out over the risks posed by high investor confidence, trade spats, Fed rate hikes and other concerns to result in a rewarding, but volatile year for investors.

In the Eurozone economic confidence declined more than expected for March. Bond yields in the region moved to the downside.

Stocks in Asia finished broadly higher on the heels of the sharp recovery in the U.S. markets yesterday that came courtesy of eased trade worries amid signs that the U.S. and China are moving to work together to address trade-related issues. Japanese equities rallied, aided by the yen extending yesterday’s decline, while stocks in mainland China and Hong Kong also notched solid gains. Meanwhile, markets in South Korea, Australia and India finished to the upside.

Market Insights 3/26/2018

U.S. equities finished solidly higher, recovering noticeably from last week’s sharp selloff that came amid trade war anxiety, as reported talks between the U.S. and China appeared to soothe nerves.

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

The Markets…

The Dow Jones Industrial Average surged 669 points (2.8%) to 24,202

The S&P 500 Index jumped 70 points (2.7%) to 2,659

The Nasdaq Composite soared 228 points (3.3%) to 7,221

In moderately-heavy volume, 899 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.33 to $65.55 per barrel and wholesale gasoline was $0.02 lower at $2.02 per gallon

The Bloomberg gold spot price rose $4.54 to $1,351.87 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 89.05

Regional manufacturing activity drops from multi-year high to kick off economic week

The Dallas Fed Manufacturing Activity Index fell to 21.4 in March from 37.2 in February—which was the highest since December 2005—and versus the Bloomberg forecast of a decline to 33.5. However, a reading above zero denotes expansion.

Treasuries finished lower, as the yields on the 2-year note rose 3 basis points to 2.29%, while the yields on the 10-year note and the 30-year bond ticked 1 bp higher to 2.83% and 3.07%, respectively.

Today’s report kicks off the shortened week, with all domestic markets being closed on Friday and the bond market closing early on Thursday in observance of the Good Friday Holiday. Despite fewer trading sessions, the trade talks will very likely continue and could possibly intensify with the mid-week release of the advance goods trade balance and the third and final read on Q4 GDP.

Tomorrow, the economic calendar will hold the S&P CoreLogic Case-Shiller Home Price Index, forecasted to show housing prices within the 20-city composite rose 6.15% year-over-year and 0.60% month-over-month on a seasonally adjusted basis. After the opening bell, Consumer Confidence will be released, with economists expecting a level of 131.0 for March, a slight move upward from February’s 130.8, as well as the Richmond Fed Manufacturing Index.

Europe lower even as U.S. markets snap back, Asia mixed as trade concerns linger

European equities finished mostly lower on the heels of last week’s global selloff that came amid flared-up trade war concerns as the U.S. announced tariffs on Chinese imports. The euro and British pound moved noticeably higher versus the U.S. dollar, while Italian political uncertainty lingered, likely curtailing upside conviction. The move came even as the U.S. markets posted a sharp recovery on reports suggesting the U.S. and China may be seeking some sort of a trade resolution. With the markets being jolted by a host of factors, mainly trade worries.

In economic news, France’s Q4 GDP growth was revised higher to a 0.7% quarter-over-quarter pace, from the previous estimate of 0.6%, where it was expected to remain and versus the 0.5% pace of expansion posted in Q3. Bond yields in the region finished mixed.

Stocks in Asia finished mixed following last week’s global selloff that came courtesy of increased trade war concerns as the U.S. announced tariffs on imports from China. However, the markets in the region showed some late-session signs of life as South Korea said it won an exemption from the U.S. steel tariffs and reports suggested the U.S. and China may be seeking trade solutions.

Japanese equities rose, with the yen losing ground as the trading day matured, while South Korean listings also gained ground. Mainland Chinese stocks declined, but those traded in Hong Kong rose, while markets in Australia traded lower, and Indian securities were higher.

Random Thoughts

In the week that was, global equity markets tripped over a trio of tribulations that included the sixth rate hike in this tightening cycle, Facebook’s compromise of user data and investor confidence, as well as the firing of the second salvo in this trade-war tempest.

As a result, the S&P Composite 1500 declined nearly 6%, accompanied by all three component benchmarks, all 11 sectors and 98% of its sub-industries.

In the small-cap space, however, we see that in a majority of cases, S&P Small-Cap 600 sectors beat their larger-cap brethren on a relative basis.

Indeed, eight of 11 sectors in the S&P SmallCap 600 recorded smaller declines than their large-cap peers on a week-to-date basis, while 10 of 11 outperformed month to date and six of 11 did so year to date. Similar magnitudes of sector outperformance were seen between the S&P MidCap 400 and S&P 500’s sectors. As a result, one might conclude that the greatest area of uncertainty remains the tiff over tariffs

As of Friday, March 23, only 7% of the S&P 1500’s 145 sub-industries were trading above their 10-week (50-day) moving averages. This reading is below the 8% level recorded at the February 8 prior low of the current correction and the weakest reading since the 3% level seen just before the conclusion of the 5/21/15-2/11/16 correction that took the S&P 500 down more than 14%. Yet as seen in the accompanying table, generated from the screening tool on CFRA’s MarketScope Advisor platform, CFRA’s equity analysts still see 20 large-, mid- and small-cap opportunities in the sub-industries that were able to keep their heads above water during this trade-war tsunami.

So there you have it. The correction that started following the 1/26/18 all-time high has yet to run its course, and is now retesting its 2/8/18 low as a result of a confluence of concerns over rates, tech and trade. Indeed, the S&P 500 is currently 9.9% below its 1/26 high, but is slightly above the 10.2% prior decline and bounced off of its 200-day moving average on Friday. As a result, investors might be wise to avoid making emotional moves that they might regret later. Instead, they might consider making some tactical trades by searching for opportunities within those sub-industries that remain above their 10-week moving averages.

Market Insights 3/23/2018

U.S. equities again finished with solid losses, quickly accelerating to the downside in the final hour of trading, as the potential ramifications of the recent tariffs imposed on China continued to weigh on investors’ minds.

Treasuries, gold and crude oil prices were higher, while the U.S. dollar lost ground.

The Markets….

The Dow Jones Industrial Average declined 425 points (1.8%) to 23,533

The S&P 500 Index fell 55 points (2.1%) to 2,588

The Nasdaq Composite decreased 174 points (2.4%) to 6,993

In heavy volume, 989 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil gained $1.58 to $65.88 per barrel and wholesale gasoline was $0.02 higher at $2.04 per gallon

The Bloomberg gold spot price jumped $18.46 to $1,347.49 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% lower at 89.44

Markets were solidly lower for the week, as the DJIA tumbled 5.7%, the S&P 500 Index plummeted 6.0%, and the Nasdaq Composite plunged 6.5%

New home sales unexpectedly dip, durable goods orders well-above expectations

New home sales unexpectedly dipped 0.6% month-over-month in February to an annual rate of 618,000 units, versus the Bloomberg forecast calling for 620,000 units and the upwardly revised 622,000 unit pace in January. The median home price was up 9.7% y/y at $326,800. New home inventory rose to 5.9 months of supply at the current sales pace from 5.8 in January. Sales fell m/m in the West and ticked lower in the Midwest, but rose solidly in the South and Northeast. New home sales are based on contract signings instead of closings.

February preliminary durable goods orders increased 3.1% month-over-month, compared to the Bloomberg estimate of a 1.6% gain, and January’s 3.6% decrease was revised to a 3.5% decline. Ex-transportation, orders rose 1.2% m/m, beating forecasts of a 0.5% rise and compared to January’s upwardly revised 0.2% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, increased 1.8%, versus projections of a 0.9% increase, and following the downward revised 0.4% decline posted in the month prior.

Treasuries were higher, as the yields on the 2-year and 10-year notes fell 2 basis points to 2.26% and 2.81%, respectively, while the 30-year bond rate ticked 1 bp lower to 3.05%.

On Wednesday, as expected, the Federal Reserve raised its target range for the federal funds rate and the Fed also stuck with its forecast of three hikes for this year, meaning it expects two more in the months to come. At the same time, however, the central bank also raised its forecast for the number of rate hikes likely over the coming few years.

Europe lower, Asian stocks routed as the U.S. and China intensify trade showdown

Stocks in Europe closed lower with fears of a trade war intensifying as China responded to yesterday’s signing of a memorandum by President Trump, which proposed up to $60 billion in tariffs on Chinese imports, by announcing that it could potentially hit 128 U.S. products with tariffs in response. After finding out late last night that the Trump administration decided to avoid a trade conflict with the European Union (EU), exempting it at least temporarily from the recently announced tariffs, EU leaders adopted the guidelines on how the they will approach the negotiations on the post-Brexit trading relationship.

The EU leaders also released a joint statement saying that the U.S. administration’s trade measures can’t be justified and that “sector-wide protection in the U.S. is an inappropriate remedy for the real problems of overcapacity.” Separately, a German government official who oversees transatlantic coordination for Chancellor Angela Merkel’s coalition and is a member of the lower house of parliament, said that Europe should use the reprieve with President Trump to team up with the U.S. against China’s potentially “unfair” trade practices. In other developments, bond yields in the region were mostly lower and the euro and British pound ticked higher versus the U.S. dollar.

Stocks in Asia finished sharply lower, with most major indexes in the region now trading in negative territory for 2018 as the trade standoff between the U.S. and China intensified, dimming the outlook for global growth. Mainland Chinese equities and those traded in Hong Kong tumbled, as China announced plans to impose $3 billion in tariffs on U.S. imports in what seems to be a measured response to President Trump’s enactment of $60 billion in tariffs on Chinese imports yesterday.

Stocks in Japan plummeted, with the yen strengthening and as the country initially thought it could avoid the Trump administration’s trade actions on steel and aluminum, but the island nation wasn’t on a list of exempted countries given by a U.S. trade representative yesterday in Senate testimony. Australian securities dropped, with materials issues leading the decline and South Korean listings plunged, with steel stocks under heavy pressure even as both countries have been listed as, at least temporarily, exempt from the recently decreed levies. Markets in India also fell sharply.

Stocks down two weeks in a row on trade concerns and tech issues

Continuing the string of losing sessions from last week, stocks closed Monday with a sharp drop, as technology issues came under intense scrutiny following news of data misuse surrounding Facebook Inc. and a political analytics firm. The economic calendar was unable to lend any support early in the week as it remained dormant until Wednesday’s release of a relatively upbeat read on existing home sales, which was joined a couple days later by some slightly somber housing data in the form of the new home sales report.

The Federal Reserve concluded its first monetary policy meeting under recently appointed Chairman Jerome Powell, where the central bank increased the target range for its fed funds rate by 25 bps, as widely expected and stuck with its forecast of three hikes for this year. Stocks were bogged down throughout the week, but Thursday’s headlines of tariffs and a potential trade war sent shares sharply lower with the Dow plunging over 700 points on the close. Stocks have now finished three of the past four weeks lower.

Next week, all domestic markets will be closed on Friday and the bond market will close early on Thursday, in observance of the Good Friday Holiday. Despite fewer trading sessions, the trade talks will very likely continue and could possibly intensify with the mid-week release of the advance goods trade balance and the third and final read on Q4 GDP. Other reports that will likely garner some attention include: personal income and spending, consumer confidence, and the final University of Michigan Consumer Sentiment Survey for March.

U.S. Market Weekly Summary – Week Ending 03/23/2018

S&P 500 Posts 6.0% Weekly Drop as Trade Worries Ramp Up; Technology Sector Leads Broad Decline

The Standard & Poor’s 500 index fell 6.0% this week, with the technology sector leading a broad decline that amounted to the index’s largest weekly percentage drop in more than two years.

The market benchmark ended this week at 2,588.26, down from last week’s closing level of 2,752.01. The weekly tumble, which marked the S&P 500′s largest one-week percentage drop since January 2016, came as fears of a trade war escalated amid US President Donald Trump’s Thursday signing of a memorandum threatening to impose tariffs on Chinese imports in addition to tariffs on steel and aluminum imports that just went into effect Friday.

Adding to investors’ worries about a trade war, China’s commerce ministry fired back Friday with a plan to set tariffs on $3 billion of US goods including pork and recycled aluminum.

The technology sector logged the largest percentage drop of the week, down 7.9%. Among the decliners in focus, Facebook shares lost 14% this week amid the revelation that Cambridge Analytica, a data firm with ties to Trump’s 2016 campaign, had improperly accessed data on Facebook users.

Shares of other social-media companies declined in sympathy. Twitter shed 13% this week while Snap (SNAP) dropped 3.8%.

The financial sector was also hit hard, posting the second-largest percentage drop of the week with a 7.2% fall. Its decliners included Bank of America, whose shares fell 9.3% as its BofA Merrill Lynch unit was hit with a $42 million fine by the state of New York for having allegedly misled clients about how their stock orders were handled.

The health-care sector had the third-largest drop of the week, off 6.8%.

Energy stocks had the smallest drop of the week, off 0.9%, as crude-oil futures rose amid hopes for the Organization of the Petroleum Exporting Countries to continue supply cuts next year.

Market Insights 3/21/2018

U.S. stocks finished the regular trading session lower amid a sharp decline in the final minutes of the session, while earlier the Federal Reserve concluded its monetary policy meeting and raised the target range for its federal funds rate by 25 basis points, as widely expected.

Treasury yields were mostly higher following the earlier release of the existing homes report, but finished lower following the Fed decision. Gold and crude oil prices traded higher and the U.S. dollar dipped.

The Markets…

The Dow Jones Industrial Average (DJIA) decreased 45 points (0.2%) to 24,682

The S&P 500 Index ticked 5 points (0.2%) lower to 2,712

The Nasdaq Composite shed 19 points (0.3%) to 7,345

In moderately heavy volume, 795 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil gained $1.63 to $65.17 per barrel and wholesale gasoline was $0.04 higher at $2.01 per gallon

The Bloomberg gold spot price moved $21.04 higher to $1,332.35 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.8% lower at 89.67

Fed increases target range as expected, housing data surprises to the upside

The Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting, under the leadership of newly appointed Chairman Jerome Powell, unanimously agreeing to increase the target range for its fed funds rate by 25 basis points to 1.50%-1.75%, as widely expected. In its released statement the Committee conveyed that it decided to raise the target range “in view of realized and expected labor market conditions and inflation.” It further added that “the stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2% inflation.” In his initial press conference since taking the Fed reins, Chairman Powell noted that FOMC participants did bring up the recent issue of tariffs, where he summarized “first, there’s no thought that changes in trade policy should have any effect on the current outlook,” but some participants reported in regard to conversations with business leaders that trade policy is a concern going forward for growth.

Existing-home sales in February rose 3.0% month-over-month (m/m) to a 5.54 million annual rate, compared to the Bloomberg forecast of a 5.40 million pace, ending two months of declines, and versus January’s unrevised 5.38 million rate. Sales of single-family homes increased 4.2% m/m, and are now 1.8% higher than year-ago levels, while purchases of multi-family structures fell 6.5%, with the y/y pace also lower. The median existing-home price was 5.9% above year ago levels at $241,700, marking the 72nd straight month of gains. Unsold inventory came in at a 3.4-months pace at the current sales rate, matching last month’s level. Inventory of homes for sale rose 4.6% m/m but were still down 8.1% y/y. Sales soared in the South and the West, while the Midwest and Northeast saw declines. Existing home sales account for the majority of the housing sales market.

Lawrence Yun, Chief Economist at the National Association of Realtors (NAR) that releases the report, said “The very healthy U.S. economy and labor market are creating a sizeable interest in buying a home in early 2018. However, even as seasonal inventory gains helped boost sales last month, home prices – especially in the West – shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar.” This is something we are keeping an eye on due to the impact on mortgage demand and the financial sector, as discussed by Schwab’s Director of Market and Sector Analysis, Brad Sorensen, CFA, in the latest Schwab Sector Views: Fantastic Financials.

The MBA Mortgage Application Index fell 1.1% last week, following the prior week’s 0.9% gain. The decline came as a 4.5% decrease in the Refinance Index more than offset a 1.4% gain for the Purchase Index. The average 30-year mortgage rate decreased 1 basis point (bp) to 4.68%.

Treasuries finished higher, with the yield on the 2-year note dropping 5 basis points (bps) to 2.30%, and the yields on the 10-year note and the 30-year bond were 2 bps lower at 2.88% and 3.11%, respectively.

While Treasury yields have moderated from a rally to multi-year highs, they have been rangebound as of late. Meanwhile, the haphazard performance of stocks over the past six sessions has brought the markets well off their highs, with the Dow currently negative for the year.

Tomorrow, the U.S. economic calendar will begin with the release of weekly initial jobless claims, forecasted to tick lower to 225,000 from the prior week’s 226,000, followed by preliminary Markit business activity reports, forecasted to show growth accelerated slightly in the manufacturing and services sectors for March. We will also receive the Index of Leading Economic Indicators, expected to have increased 0.5% m/m for February following January’s 1.0% increase. The March Kansas City Fed Manufacturing Index will round out the day, predicted to remain at February’s level of 17 with a reading above 0 indicating expansion in activity.

Europe and Asia finish mixed with trade and Fed meeting in focus

European equities finished mixed with stocks moving back toward unchanged status late in the day, as investors were on the fence ahead of the Fed rate decision, the accompanying economic and interest rate outlooks, and Fed Chief Powell’s press conference. The U.K. markets saw added pressure, as the nation’s retail sector continues to suffer. As well, a mixed jobs report in the country fostered some uncertainty surrounding the Bank of England’s take on the data amid expectations of the Central Bank looking to begin raising interest rates as early as May. Global trade concerns also lingered, as the announcement of tariffs by the U.S. against China could come as early as tomorrow. For more on the global trade landscape.

The euro and British pound gained ground versus the U.S. dollar, while bond yields in the region were mixed.

Stocks in Asia were again mixed on the heels of overnight gains in the U.S., as caution ahead of today’s monetary policy decision from the Fed kept confidence at bay. As well, the ubiquitous trade tensions remained an overhang, with President Trump reportedly readying up to $60 billion in tariffs against China that could be unveiled as early as Thursday. Stocks trading in mainland China and Hong Kong declined in the wake of the uneasiness.

The market impact of escalating trade frictions on the growth of economies and companies may begin to weigh on stocks, especially on emerging market stocks. The metal tariffs mark an escalation by the Trump administration relative to the modest trade actions taken so far and may provoke retaliation by impacted countries, posing further risk to the markets in the coming weeks or months. However, Australian securities advanced on strength from resource-related stocks, and Indian equities rose, getting a boost from financial issues. South Korean shares were nearly unchanged, while markets in Japan were closed for a holiday.

The international economic docket for tomorrow will include a manufacturing PMI read and the All Industry Activity Index from Japan, employment data from Australia, the Ifo business climate survey from Germany, retail sales from the U.K., and Markit business activity reports for France, Germany and the Eurozone. In central bank action, the Bank of England will announce its bank rate decision, with no changes from its current stance expected.