U.S. stocks registered a solid decline to close out a volatile week as questions in regard to the future of the Sino-American trade relationship continue to dominate headlines. The trade dialogue overshadowed a mixed March labor report, while separately, Fed Chairman Powell remarked that the outlook for inflation and the domestic labor market support further gradual interest-rate increases. Treasuries were higher and the U.S. dollar, gold, and crude oil prices were lower. MGM Resorts International was in focus after reports surfaced that the company may have expressed interest in Wynn Resorts.

The Dow Jones Industrial Average (DJIA) fell 572 points (2.3%) to 23,933, the S&P 500 Index dropped 58 points (2.2%) to 2,604, and the NASDAQ Composite tumbled 161 points (2.3%) to 6,915. In moderate-to-heavy volume, 879 million shares were traded on the NYSE and 2.3 billion shares changed hands on the NASDAQ. WTI crude oil was $1.48 lower at $62.06 per barrel and wholesale gasoline was $0.02 lower at $1.95 per gallon. Elsewhere, the Bloomberg gold spot price added $7.15 to $1,326.51 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly 0.4% lower at 90.10. Markets were lower for the week, as the DJIA declined 0.7%, the S&P 500 Index decreased 1.4%, and the NASDAQ Composite lost 2.1%.

Nonfarm payrolls rose by 103,000 jobs month-over-month (m/m) in March, compared to the Bloomberg forecast of a 185,000 increase. The rise of 313,000 seen in February was revised to a gain of 326,000 jobs. The total downward revision to job gains for February and January was 50,000. Excluding government hiring and firing, private sector payrolls increased by 102,000, versus the forecasted gain of 188,000, after rising by 320,000 in February, revised from the 287,000 increase that was initially reported.

The unemployment rate remained at 4.1% in February, versus estimates calling for a dip to 4.0%, while average hourly earnings were up 0.3% m/m, matching projections and versus February’s unrevised 0.1% increase. Y/Y, wage gains were 2.7% higher, in line with estimates and compared to February’s unrevised 2.6% increase. Finally, average weekly hours remained at February’s unrevised 34.5 rate, as expected.

The report did not appear to be fostering concerns about the health of the labor market, given the upward revisions to the prior month’s already strong data and as the winter weather in March likely distorted the figures. In the wake of the data, Federal Reserve Chairman Jerome Powell in Chicago delivered remarks on the economy, where he said that the outlook for inflation and the U.S. labor market support further gradual interest-rate increases, while the lack of a spike in wage gains shows the labor market is not excessively tight.

Consumer credit, released in the final hour of trading, showed consumer borrowing increased by $10.6 billion during February, well shy of the $15.5 billion forecast of economists polled by Bloomberg, while January’s figure was adjusted higher to an increase of $15.6 billion from the originally reported $13.9 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose by $10.5 billion, while revolving debt, which includes credit cards, increased by $100 million.

Treasuries traded higher, with the yield on the 2-year note declining 4 basis points (bps) to 2.27% while the yields on the 10-year note and the 30-year bond decreased 6 bps to 2.77% and 3.02%, respectively.

Treasury yields and the U.S. dollar were under pressure, while the stock market came off a three-peat of gains that followed Monday’s tumble. Volatility persisted as trade war uncertainty festers, exacerbated by President Donald Trump telling trade officials to consider $100 billion in extra tariffs on Chinese goods. The order came in response to China’s proposed retaliatory levies on over 100 U.S. products after the U.S.’s initially proposed $50 billion in tariffs on Chinese goods earlier this week. The recent selloff in the technology sector also remains a source of volatility, along with the continued solid economic backdrop, despite today’s mixed labor report.

Schwab Center for Financial Research – Market Analysis Group

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