U.S. stocks added to a weekly advance to close the best quarter since 2009.
The U.S. dollar rested from a recent upward move, while gold and crude oil prices were higher.
The markets also rallied for the first quarter, with the DJIA jumping 11.2%, the S&P 500 Index was surging 13.1%, and the Nasdaq Composite soaring 16.5%.
The Dow Jones Industrial Average rose 211 points (0.8%) to 25,929
The S&P 500 Index gained 19 points (0.7%) to 2,834
The Nasdaq Composite advanced 60 points (0.8%) to 7,729
In heavy volume, 1.1 billion shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq
WTI crude oil increased $0.84 to $60.14 per barrel and wholesale gasoline was up $0.02 at $1.88 per gallon
The Bloomberg gold spot price traded $1.78 higher to $1,292.20 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was little changed at 97.25
Markets were nicely higher on the week, as the DJIA advanced 1.7%, the S&P 500 Index was up 1.2%, and the Nasdaq Composite gained 1.1%
Personal spending below estimates, PCE deflator misses forecasts
Personal income dipped 0.1% month-over-month in January, as was previously reported, and compared to December’s 1.0% rise. Personal spending gained 0.1% m/m in January, versus the Bloomberg estimate of a 0.3% ascent, and December’s unfavorably-revised 0.6% decline. The January savings rate as a percentage of disposable income was 7.5%.
New home sales ascended 4.9% month-over-month in February to an annual rate of 667,000 units, versus forecasts calling for 620,000 units and the upwardly-revised 636,000 unit pace in January. The median home price was down 3.6% y/y to $315,300.
Treasuries were mostly lower, with the yield on the 2-year note up 2 basis points (bps) to 2.26% and the yield on the 10-year note ascending 1 bp to 2.40%, while the yield on the 30-year bond dipped 1 bp to 2.81%.
Treasury yields mostly extended yesterday’s rise after seeing pressure and the U.S. dollar held onto a weekly gain, while the S&P 500 finished the quarter strong. Volatility persisted as global growth uncertainty festers, exacerbated by an inversion of the spread between the 3-month and the 10-year U.S. Treasury note yields that raised recession fears earlier in the week.
The final March University of Michigan Consumer Sentiment Index was adjusted higher to 98.4, from the preliminary figure and expectations of 97.8. The index was above February’s 93.8 level. The 1-year inflation forecast was 2.5% higher m/m, below February’s 2.6% number, and the 5-10 year inflation outlook rose to 2.5% from 2.3%.
Global markets rise as trade negotiations capture attention
European equities finished higher, with trade negotiation concerns in focus on the heels of high-level trade representatives from the U.S. and China meeting in Beijing, while market participants were still mindful of possible U.S. recession concerns that brought heavy pressure on global markets earlier in the week. The basic resources sector, which has a notable exposure to the Chinese economy, assisted the markets higher on the heels of U.S. Treasury Secretary Mnuchin sharing that U.S./China trade talks were constructive.
Prime Minister Theresa May’s withdrawal agreement, without an accompanying political declaration that would govern the future European Union/U.K. relationship, failed to be approved by Parliament for a third time, as an extended Brexit deadline nears. The euro was little changed and the British pound dipped versus the U.S. dollar, while bond yields in the region were mixed.
Stocks in Asia also finished higher following the U.S. market recovery yesterday and amid the cooling trade war concerns. Chinese stocks led the way as shares in mainland China surged, producing the highest quarterly returns among national markets. Investors continued to watch the slide of the 10-year Treasury yield, which hit its lowest level since December of 2017 this week.
Japanese equities rose as the yen moved lower versus the U.S. dollar, while the nation’s industrial production was in line with expectations m/m and its retail sales missed estimates for February.
Stocks erase last week’s stumble
After falling in the prior week, U.S. stocks pushed back to the upside this week, limiting the damage as the slowing global growth concerns that led to the tumble eased courtesy of suggestions that the U.S./China trade negotiations were seeing substantial progress, including on structural issues that have been a stumbling block. All but the communication services and utilities sectors posted gains for the week, overcoming economic data showing Q4 GDP growth was revised lower than expected and that the Consumer Confidence Index slumped in March. Volatility continued to rise as recession fears were stocked by the inversion of the 3-month and 10-year U.S. Treasury yields during the week. The U.S. dollar extended last week’s gains and the 10-year Treasury note fell to its lowest level since 2017 this week.
U.S. stocks resumed their uptrend after a short respite, but with the economy slowing, the yield curve inverted, and earnings likely negative for at least the first quarter, the risk of a pullback appears elevated. The first quarter was highly likely weak for both earnings and the economy overall; but it could be followed by at least a modest rebound in the second quarter if traditional seasonal patterns hold. Given the slowdown, the Fed is now forecasting no rate hikes in 2019, which suggests binary risks of either slower growth than expected, or higher inflation than expected.
The recent inversion of the most widely-watched U.S. yield curve is not only a sign of rising recession risk, it can also be instructive as to international markets as well.