Markets Head into Holiday Weekend Lower…..
U.S. equities finished the last session of a holiday-shortened week lower, investors sifted through a flurry of economic and earnings data. Dow member Goldman Sachs, Citigroup, and Morgan Stanley all reported mostly better-than-expected results, but Wells Fargo missed on revenues, and all of the financial companies noted challenges from the geopolitical and macro environments. In other earnings news, Dow component UnitedHealth Group topped expectations and raised its guidance. Outside earnings, Twitter remained in focus after Elon Musk said he is making a takeover offer for the social media platform. In economic news, retail sales came in mixed for March, but February’s figures were revised higher, jobless claims rose off a severely low level, consumer sentiment unexpectedly jumped, import prices came in hotter than expected, and business inventories continued to grow. Treasuries were sharply lower in the wake of the data, lifting yields, and the U.S. dollar traded higher, while crude oil prices jumped to add to recent gains, and gold fell. Europe gained ground as the markets focused on the European Central Bank’s unchanged monetary policy decision, while markets in Asia finished mostly higher, with the Bank of Korea raising rates.
The Dow Jones Industrial Average fell 113 points (0.3%) to 34,451, the S&P 500 Index lost 54 points (1.2%) to 4,393, and the Nasdaq Composite decreased 293 points (2.1%) to 13,351. In moderate volume, 4.0 billion shares of NYSE-listed stocks were traded, and 4.5 billion shares changed hands on the Nasdaq. WTI crude oil rose $2.70 to $106.95 per barrel. Elsewhere, the gold spot price traded $9.60 lower to $1,975.10 per ounce, and the Dollar Index was 0.5% higher at 100.34. Markets were lower for the week, as the DJIA was down 0.8%, the S&P 500 lost 2.1%, and the Nasdaq Composite decreased 2.6%.
Advance retail sales for March rose by 0.5% month-over-month (m/m), versus the Bloomberg consensus forecast of a 0.6% rise, and compared to February’s upwardly-adjusted 0.8% increase. Last month’s sales ex-autos grew 1.1% m/m, compared to expectations of a 1.0% gain and as February’s figure was revised higher to a 0.6% increase. Sales ex-autos and gas were up 0.2% m/m, matching estimates, while February’s reading was adjusted upward to a 0.1% decline. However, the control group, a figure used to calculate GDP, dipped 0.1% m/m, versus projections of a 0.1% increase, and following February’s favorably-revised 0.9% decline.
Initial jobless claims came in at a level of 185,000, for the week ended April 9, versus estimates calling for 170,000, and versus the prior week’s upwardly-revised 167,000 level. The four-week moving average increased by 2,000 to 172,250, and continuing claims for the week ended April 2 fell by 48,000 to 1,475,000, versus estimates of 1,500,000. The four-week moving average of continuing claims dropped by 29,750 to 1,511,500.
The preliminary University of Michigan Consumer Sentiment Index for April showed that sentiment improved unexpectedly, rising to 65.7 from March’s final reading of 59.4, and versus an expected dip to 59.0. The index bounced off the lowest level since 2011 as the expectations component of the report posted the largest monthly increase since 2006, per Bloomberg, and the current conditions portion of the survey also improved. The release showed that sentiment was boosted by the strong jobs market and wage expectations, which countered multi-decade high inflation. The 1-year inflation expectation remained at 5.4%, versus the expected 5.6% rate, the highest since December of 1981, and the 5-10 year inflation outlook held steady at 3.0%.
The Import Price Index increased 2.6% m/m for March, versus estimates of a 2.3% gain, and compared to February’s upwardly-revised 1.6% increase. Versus last year, prices were up by 12.5%, compared to forecasts of an 11.9% increase and February’s upwardly-revised 11.3% rise.
Business inventories rose 1.5% m/m in February, above forecasts of a 1.3% increase, after January’s upwardly-revised increase of 1.3%.
Treasuries were lower following the retail sales, jobs, sentiment, and inflation data, and on the heels of a recent drop that has seen rates jump and the yield curve steepen. The bond markets have been driven primarily by expectations that the Fed is set to get substantially aggressive with tightening monetary policy to try to combat surging inflation. Recent Fedspeak has been a key contributor to the bond market moves, along with the minutes from the Fed’s March meeting gave details of the balance sheet reduction plan and suggested the potential for multiple rate hikes of 50 basis points (bps), which would be the first time it raised rates in excess of 25 bps in over 20 years.
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