U.S. equities finished solidly lower for a third-straight session, while also notching a weekly loss for a fourth-consecutive week, amid the pervasive worries over trade, which ratcheted higher after President Donald Trump threatened to increase tariffs on Mexico. Treasury yields added to a recent slump amid the uneasiness, and the U.S. dollar was weaker, with an upbeat U.S. personal income and spending report mitigated by disappointing reads on consumer sentiment and regional manufacturing, as well as discouraging data overseas. Meanwhile, crude oil prices tumbled and gold jumped. News on the equity front surrounded some earnings from the retail sector, with Gap suffering following its earnings report, but Williams-Sonoma getting a boost from its quarterly figures.

The Dow Jones Industrial Average (DJIA) tumbled 355 points (1.4%) to 24,815, the S&P 500 Index declined 37 points (1.3%) to 2,752, and the Nasdaq Composite plunged 115 points (1.5%) to 7,453. In heavy volume, 982 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq. WTI crude oil dropped $3.09 to $53.50 per barrel and wholesale gasoline was down $0.08 at $1.77 per gallon. Elsewhere, the Bloomberg gold spot price jumped $17.46 to $1,306.11 per ounce, and the Dollar Index— a comparison of the U.S. dollar to six major world currencies—lost 0.4% to 97.77. Markets were lower for the week, as the DJIA fell 3.0%, the S&P 500 Index lost 2.8%, and the Nasdaq Composite declined 2.9%.

Personal income rose 0.5% month-over-month (m/m) in April, versus the Bloomberg forecast of a 0.3% gain, and compared to March’s unrevised 0.1% rise. Personal spending gained 0.3%, north of estimates of a 0.2% increase, and following March’s upwardly-revised 1.1% rise. The April savings rate as a percentage of disposable income was 6.2%. The PCE Deflator was up 0.3% m/m, matching expectations and above the prior month’s unrevised 0.2% advance. Compared to last year, the deflator was 1.5% higher, versus expectations of a 1.6% increase and March’s downwardly-adjusted 1.4% gain. Excluding food and energy, the PCE Core Index was up 0.2% m/m, in line with expectations and above the prior month’s upwardly-revised 0.1% increase. The index was 1.6% higher y/y, matching estimates, and slightly above March’s downwardly-revised 1.5% rise.

The final May University of Michigan Consumer Sentiment Index was adjusted lower to 100.0, from the preliminary figure of 102.4 and below expectations of 101.5. However, the index was above April’s 97.2 level. The 1-year inflation forecast jumped to 2.9% from April’s 2.5% rate, and the 5-10 year inflation outlook rose to 2.6% from 2.3%.

The Chicago PMI Index improved to 54.2 in May from April’s 52.6 level and compared to the expected increase to 54.0. A reading above 50 denotes expansion.

Treasuries were solidly higher, as the yield on the 2-year note dropped 12 basis points (bps) to 1.94%, the yield on the 10-year note fell 9 bps to 2.13%, and the 30-year bond rate decreased 8 bps to 2.57%. The global stock markets were under heavy pressure as escalated trade tensions were amplified by President Donald Trump threatening increased tariffs on Mexico, aimed at combating illegal immigration. The Mexican peso fell sharply and the trade concerns joined increasing global economic growth worries following some mixed data, which have fostered a drop in bond yields and a coinciding inversion of a key portion of the Treasury yield curve.

Volatility is likely to continue next week, with trade uncertainty likely persisting and the economic calendar delivering a host of key reports, culminating with Friday’s May nonfarm payroll report as the strong labor market has been a main contributor in keeping recessions concerns in check. Ahead of the jobs report, the ISM will release its Manufacturing and non-Manufacturing reports and factory orders will hit the tape, along with the trade balance and the Fed’s Beige Book. Also, leading up to the June 19th monetary policy decision from the Federal Open Market Committee (FOMC), we will get a host of Fedspeak, headlined by Tuesday morning’s discussion of policy strategy by Chairman Jerome Powell.

©2019 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.