Stocks Lower Amid Tech Losses, Value Gains…..

U.S. equities finished lower, with the tech-heavy Nasdaq lagging the other major indices. Stocks associated with the gradual reopening of the economy and more value-oriented issues saw gains, as business activity data helped paint an upbeat picture, with global March manufacturing and services sector reports showing solid expansion. However, growth issues faded following an earlier rebound, despite a dip in Treasury yields, while the U.S. dollar extended a recent rebound. In other economic news, mortgage applications declined as refinancing activity fell and durable goods orders unexpectedly dipped, but the prior month was revised higher. Gold traded higher and crude oil prices rallied after yesterday’s sharp decline. In equity news, Dow member Intel announced an initial $20.0 billion investment to bolster its foundry business, while GameStop missed earnings forecasts and Adobe topped earnings estimates and raised its guidance. Europe finished mixed as upbeat data was countered by renewed COVID-19 lockdowns in parts of the region, while markets in Asia were lower.

The Dow Jones Industrial Average fell 3 points to 32,420, the S&P 500 Index decreased 21 points (0.6%) to 3,889, while the Nasdaq Composite was down 266 points (2.0%) at 12,962. In heavy volume 1.0 billion shares were traded on the NYSE and 6.1 billion shares changed hands on the Nasdaq. WTI crude oil jumped $3.42 to $61.18 per barrel. Elsewhere, the Bloomberg gold spot price was up $6.74 at $1,738.81 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.3% to 92.56.

March business activity shows expansion slightly slower than expected, but remains solid…..

The preliminary Markit U.S. Manufacturing PMI Index for March ticked higher to 59.0 from February’s unrevised 58.6 figure, moving modestly further into expansion territory denoted by a reading above 50. The Bloomberg consensus estimate called for the index to rise to 59.5. The preliminary Markit U.S. Services PMI Index showed growth (above 50) for the key U.S. sector nudged higher, rising to 60.0 from February’s 59.8 figure, and compared to forecasts of a slight increase to 60.1.

Markit noted that the expansion in March business activity was largely driven by service providers, as input shortages and supplier delays limited the growth of manufacturing production capacity. The report also showed manufacturing new orders posted the sharpest rise since June 2014 despite the supply constraints and new business in the services sector recorded the steepest increase in almost three years. Pricing pressures continued as input prices accelerated at the fastest pace on record and stronger demand conditions allowed for the partial pass-through of costs to clients with the overall pace of selling price inflation also hitting a record. On employment, Markit added that goods producers registered a strong increase in employment and service sector firms, meanwhile, recorded the quickest rise in staff numbers in the year-to-date, resulting in the largest overall jobs gain since December.

February preliminary durable goods orders decreased 1.1% month-over-month (m/m), versus estimates of a 0.5% rise and compared to January’s upwardly revised 3.5% increase. Ex-transportation, orders decreased 0.9% m/m, versus forecasts of a 0.5% gain and compared to January’s favorably adjusted 1.6% rise. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were down 0.8%, compared to projections of a 0.5% rise, while the prior month’s figure was revised higher to a 0.6% increase.

The MBA Mortgage Application Index fell by 2.5% last week, following the prior week’s 2.2% decline. The decrease came as a 5.1% drop in the Refinance Index more than offset a 2.6% increase for the Purchase Index. The average 30-year mortgage rate rose 8 basis points (bps) to 3.36%.

Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen wrapped up their two days of testimony before Congress on the state of the economy as it emerges from the pandemic. Powell and Yellen, as expected, reiterated that while the recovery for the U.S. economy has generally progressed quicker than expected and looks to be strengthening, it is far from complete. Powell continued to stress that the central bank will continue providing support to the economy through continued highly-accommodative monetary policy and will also communicate well in advance of tapering, while also again downplaying fears of inflation.

Treasuries nudged higher, as the yield on the 2-year note was flat at 0.14%, while the yields on the 10-year note and 30-year bond fell 2 bp to 1.61% and 2.30%, respectively.

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