Markets Close Out Q1 with Losses…..

U.S. equities finished in the red and near the lows of the day to close out its worst quarter in two years, despite a recent rally that was able to chip away at the otherwise dismal performance for Q1. The markets continued to focus on the ongoing war in Ukraine, as well as a noticeable drop in oil prices with the U.S. announcing another drawdown of its strategic reserves and as OPEC and its allies, known as OPEC+, expectedly held onto its production targets following another brief meeting today. Attention was paid to action in the Treasury bond markets after a recent sharp flattening in the yield curve has begun to foster inversion and recession chatter. Treasuries were higher to put some pressure on yields, and the U.S. dollar gained ground, as did gold. Equity news was light, but Dow member Walgreens Boots Alliance topped quarterly expectations but held its outlook unchanged. In economic news, personal income rose in line with forecasts, but spending missed, and Chicago manufacturing growth accelerated much more than expected. Additionally, jobless claims accelerated slightly more than expected though remained at historically low levels ahead of tomorrow’s key nonfarm payroll report. Markets in both Europe and Asia finished lower.

The Dow Jones Industrial Average declined 550 points (1.6%) to 34,678, the S&P 500 Index shed 72 points (1.6%) to 4,530, and the Nasdaq Composite dropped 222 points (1.5%) to 14,221. In moderate volume, 4.7 billion shares of NYSE-listed stocks were traded, and 5.2 billion shares changed hands on the Nasdaq. WTI crude oil tumbled $7.54 to $100.28 per barrel. Elsewhere, the gold spot price traded $4.10 higher to $1,943.10 per ounce, and the Dollar Index was up 0.6% at 98.36. Markets were solidly lower for Q1, as the DJIA was down 4.6%, the S&P 500 lost 4.9%, and the Nasdaq Composite decreased 9.1%.

Personal income rose 0.5% month-over-month (m/m) in February, in line with the Bloomberg consensus forecast, and compared to January’s upwardly-revised 0.1% gain. Personal spending increased 0.2%, south of expectations of a 0.5% rise, and compared to the prior month’s favorably-adjusted 2.7% rise. The February savings rate as a percentage of disposable income was 6.3%, up from January’s 6.1% rate.

The PCE Deflator increased 0.6% m/m, matching expectations, and following January’s downwardly-adjusted 0.5% rise. Compared to last year, the deflator was 6.4% higher, in line with estimates, and above the prior month’s downwardly-adjusted 6.0% gain. Excluding food and energy, the PCE Core Price Index rose 0.4% m/m, matching expectations and compared to January’s unrevised 0.5% rise. The index was 5.4% higher y/y, below estimates of a 5.5% increase, and above January’s unrevised 5.2% rise.

Initial jobless claims came in at a level of 202,000 for the week ended March 26, versus estimates calling for 196,000, and versus the prior week’s upwardly-revised 188,000 level. The four-week moving average declined by 3,500 to 208,500, and continuing claims for the week ended March 19 fell by 35,000 to 1,307,000, versus estimates of 1,340,000. The four-week moving average of continuing claims dropped by 40,500 to 1,389,000.

The Chicago PMI moved further into expansion territory (a reading above 50) than forecasted. The index rose to 62.9 in March from February’s 56.3 reading, and versus estimates calling for a rise to 57.0. The stronger-than-expected report came as growth in new orders and production accelerated, supplier deliveries rose at a faster pace, and the contraction in employment decelerated. Prices paid did decelerate but remained in expansion territory.

Treasuries are higher after a recent drop that lifted yields amid increased expectations of a more aggressive Fed monetary policy tightening cycle as it tries to combat the surge in inflation.

Tomorrow’s economic calendar will likely be the highlight of the week, beginning with the March labor report, forecasted to show nonfarm payrolls added 490,000 jobs and private sector payrolls increased by 495,000. The unemployment rate is estimated to tick lower to 3.7% from February’s 3.8% rate, and average hourly earnings are anticipated to have gained 0.3% m/m and be up 5.5% y/y. After the opening bell, the ISM Manufacturing Index will be released, projected to nudge higher to a level of 59.0 in March from the prior month’s 58.6, as well as the final read on the S&P Global Manufacturing PMI, which is expected to remain at the preliminary level of 58.5, with a reading above 50 for both indexes indicating expansion in activity. Finally, February construction spending is on tap, with economists calling for a 1.0% m/m increase.

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