Recent Rally Rests…..

U.S. equities lost ground, taking a bit of a breather from the recent rally that has taken the S&P 500 out of correction territory and rescued the Nasdaq from a bear market. The resiliency in the markets have come in the face of the ongoing war in Ukraine, and elevated expectations the Fed is set to deploy an aggressive campaign to try to stymie surging inflation pressures. The Treasury yield curve remained in focus with the investors closely monitoring the implications of inversions following the recent severe flattening. Crude oil prices rebounded to resuscitate some uneasiness after a pullback this week amid the hopes of a positive development on ceasefire talks in Ukraine and new COVID lockdowns in China. Treasuries were higher to apply some downside pressure on yields, and gold recovered somewhat, while the U.S. dollar was lower. Earnings dominated the equity front, as Micron Technology and Lululemon Athletica posted upbeat results and guidance, while Chewy and RH fell short on their quarterly reports. In economic news, mortgage applications continued to fall amid the jump in interest rates, ADP’s private sector payroll report topped forecasts, and Q4 GDP was unexpectedly revised lower. Europe finished mixed after yesterday’s rally, while markets in Asia were mostly higher with Japan lagging.

The Dow Jones Industrial Average rose lost 65 points (0.2%) to 35,229, the S&P 500 Index declined 29 points (0.6%) to 4,602, and the Nasdaq Composite decreased 177 points (1.2%) to 14,442. In moderate volume, 4.3 billion shares of NYSE-listed stocks were traded, and 5.4 billion shares changed hands on the Nasdaq. WTI crude oil rose $3.58 to $107.82 per barrel. Elsewhere, the gold spot price traded $22.00 higher to $1,940.00 per ounce, and the Dollar Index was down 0.6% at 97.86.

The MBA Mortgage Application Index declined 6.8% last week, following the prior week’s decrease of 8.1%. The third-straight weekly downturn came as a 14.9% drop in the Refinance Index more than offset a 0.6% gain for the Purchase Index. The average 30-year mortgage rate extended its climb, jumping 30 bps to 4.80%, and is up 147 bps versus a year ago.

The ADP Employment Change Report showed private sector payrolls rose by 455,000 jobs in March, above the Bloomberg forecast calling for a 450,000 gain. February’s increase of 475,000 jobs was revised higher to a 486,000 increase. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader March nonfarm payroll report, expected to show headline employment grew by 490,000 jobs and private sector jobs rose by 499,000. The unemployment rate is forecasted to dip to 3.7% and average hourly earnings are projected to rise 0.4% month-over-month (m/m) and be up 5.5% y/y.

The final look (of three) at Q4 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 6.9%, versus estimates to be unrevised at the 7.0% growth rate posted in the second release. Q3’s figure was unadjusted at a 2.3% increase. Personal consumption was revised to a 2.5% rise for Q4 from the previous estimate of an 3.1% gain and versus expectations to be unrevised. Q3 consumption was unadjusted at a 2.0% gain.

On inflation, the GDP Price Index was unrevised at a 7.1% gain, matching estimates, and the core PCE Index, which excludes food and energy, was also unadjusted to a 5.0% advance in line with expectations.

Treasuries are subdued after a recent rise in yields amid increased expectations of a more aggressive Fed monetary policy lightening.

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