U.S. equities finished lower, as yesterday’s Fed monetary policy decision, which appeared to dampen rising expectations that the next move could be a rate cut, overshadowed stronger-than-expected reads on U.S. nonfarm productivity and factory orders, as well as mostly upbeat earnings results. Treasury yields and the U.S. dollar were higher on the data, while crude oil prices fell sharply amid oversupply worries and gold is also lost ground.
The Dow Jones Industrial Average (DJIA) declined 122 points (0.5%) to 26,308 the S&P 500 Index fell 6 points (0.2%) to 2,918, and the NASDAQ Composite decreased 13 points (0.2%) to 8,037. In moderate volume, 838 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil lost $1.79 to $61.81 per barrel and wholesale gasoline was down $0.04 at $2.02 per gallon. Elsewhere, the Bloomberg gold spot price decreased $5.64 to $1,271.12 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.1% at 97.83.
Weekly initial jobless claims were unchanged at the prior week’s unrevised 230,000 level, versus the Bloomberg forecast of a decline to 215,000. The four-week moving average rose 6,500 to 212,500, while continuing claims increased by 17,000 to 1,671,000, north of estimates of 1,660,000.
Preliminary Q1 nonfarm productivity rose 3.6% on an annualized basis, versus expectations of a 2.2% gain, and following the downwardly-revised 1.3% increase seen in Q4. Unit labor costs declined 0.9%, versus the forecast calling for a 1.5% gain. Unit labor costs were revised higher to an increase of 2.5% in Q4.
Factory orders rose 1.9% month-over-month (m/m) in March, above expectations of a 1.6% gain, and compared to February’s favorably-revised 0.3% decline. Stripping out the volatile transportation component, orders gained 0.8%, versus February’s unrevised 0.3% gain. Final durable goods orders were revised slightly lower to a 2.6% rise m/m for March, and orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were revised upward to a 1.4% increase.
Treasuries were lower, as the yield on the 2-year note rose 5 basis points (bps) to 2.34%, the yield on the 10-year note added 4 bps to 2.55%, while the 30-year bond rate gained 2 bps to 2.94%. The moves came after yesterday’s conclusion of the Federal Open Market Committee’s (FOMC) monetary policy meeting, after which it announced no change to its target range for the Fed funds rate of 2.25%-2.50%. The Committee indicated that since it met in March, that “the labor market remains strong and economic activity rose at a solid rate”, but that “overall inflation and inflation for items other than food and energy have declined and are running below 2 percent.” The Committee also continued to note that it “will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.” No economic projections were released with this meeting’s statement. In his scheduled press conference after the statement, Chairman Jerome Powell said that the U.S. economy is on a healthy path, incoming economic data was broadly in line with expectations, and that weak global growth, BREXIT, and trade risks have moderated. Powell also added that he felt that the low inflation that the economy was experiencing was transitory.
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