Closing Stock Market SummaryThe S&P 500 declined 0.3% on Thursday, although it had dropped as much as 1.5% on concerns about an elongated trade war with China. The Dow Jones Industrial Average (-0.5%), the Nasdaq Composite (-0.4%), and the Russell 2000 (-0.3%) also finished near their highs after being down as much as 1.7%, 1.9%, and 1.8%, respectively.
The stock market began the day noticeably lower following tariff-related comments from President Trump. The president told a rally of supporters Wednesday that China "broke the deal," and said he had no problem with following through with tariffs on China. The tariff rate on $200 billion of Chinese imports is set to increase to 25% at midnight.
Investors were steadfast on de-risking, pushing stocks to session lows in morning action. All 11 S&P 500 sectors showed considerable losses, which helped send the S&P 500 below its 50-day moving average (2860). U.S. Treasuries rose in a flight-to-safety trade, and the CBOE Volatility Index (VIX 19.35, -0.26) touched 23.38 at its high.
A sense that the negativity had gotten too far, though, helped abate the selling pressure. Renewed buying interest helped the S&P 500 reclaim its 50-day moving average on a closing basis while trade headline volatility persisted.
A CNBC headline was quick to point out that President Trump said he had an "excellent alternative" to a trade deal, which was later clarified that the tariffs were the alternative. President Trump also said he received a letter from President Xi and intended to give him a call later, which was a sign of good will ahead of a Thursday dinner between Vice Premier Liu He and USTR Lighthizer.
Nevertheless, the trade-sensitive S&P 500 materials (-0.8%) and information technology (-0.7%) sectors were the worst-performing groups. The real estate (+0.3%) and energy (+0.1%) sectors were the lone sectors to finish higher.
Shares of Walt Disney (DIS 133.59, -1.40, -1.0%) finished lower despite it beating top and bottom-line estimates. Shares of Intel (INTC 46.62, -2.62, -5.3%) dropped after it was downgraded to Market Perform from Outperform at BMO Capital Markets. Chevron (CVX 121.19, +3.69, +3.1%), meanwhile, decided to not provide a counteroffer to acquire Anadarko Petroleum (APC 73.39, -2.47, -3.3%).
U.S. Treasuries finished on a higher note, although buying interest cooled off as equities staged a recovery. The 2-yr yield declined four basis points to 2.26%, and the 10-yr yield declined three basis points to 2.46%. The U.S. Dollar Index lost 0.2% to 97.42. WTI crude lost 0.6% to $61.73/bbl.
Reviewing Thursday's batch of economic data:
- The Producer Price Index for final demand increased 0.2% m/m in April, as expected, while the index for final demand, less food and energy ("core PPI"), increased 0.1% (consensus 0.2%). That left the yr/yr increases at 2.2% and 2.4%, respectively, unchanged from March.
- The key takeaway from the report is that it didn't show any acceleration in core producer inflation, which will keep the market's pass-through concerns for the consumer in check.
- Initial claims for the week ending May 4 decreased by 2,000 to 228,000 (consensus 220,000). Continuing claims for the week ending April 27 increased by 13,000 to 1.684 million.
- The key takeaway from the report is that the four-week moving average of 220,250 remains relatively close to a 50-year low, which implies there hasn't been any undue weakening in the labor market.
- The trade deficit was $50.0 billion in March (consensus -$51.2 bln), up from -$49.3 billion in February. Exports of $212.0 billion were $2.1 billion more than February exports. Imports of $262.0 billion were $2.8 billion more than February imports.
- The key takeaway from the report is that there hasn't been a meaningful improvement in the trade deficit despite efforts to reduce it with increased tariffs.
- Wholesale inventories declined 0.1% in March (consensus +0.1%) on top of an upwardly revised 0.4% increase (from 0.2%) in February. Wholesale sales jumped 2.3% following an unrevised 0.3% increase in February.
- The key takeaway from the report is that inventory growth continues to outpace sales growth on a year-over-year basis, which should help keep price pressures in check.
Looking ahead, investors will receive the Consumer Price Index for April and the Treasury Budget for April on Friday.
- Nasdaq Composite +19.2% YTD
- Russell 2000 +16.4% YTD
- S&P 500 +14.5% YTD
- Dow Jones Industrial Average +10.7% YTD