Closing Stock Market Summary
The stock market started the day in rally-mode, but finished the day with sharp losses. The Nasdaq Composite lost 1.4% and the Dow Jones Industrial Average shed more than 500 points.
Some participants pointed to comments from Minneapolis Fed President Kashkari (not an FOMC voter), who said it's possible the Fed might not cut rates this year if progress on inflation stalls, as the reason for the afternoon deterioration. Others indicated increased geopolitical tensions in the Middle East related to potential retaliation by Iran against Israel as the key factor driving the afternoon sell-off.
The latter concern also drove afternoon gains in oil prices and defense-related stocks. WTI crude oil futures climbed 1.3% to $86.57/bbl. Lockheed Martin (LMT 454.04, +6.14, +1.4%) and RTX (RTX 99.31, +1.76, +1.8%) were winning standouts from the defense space.
There is an overall lingering sense among some participants that stocks are due for a more meaningful pullback after a stellar start to the year, which also contributed to the afternoon retreat.
Just about everything came along for the late sell-off. The equal weighted S&P 500 dropped 1.0% and all 11 S&P 500 sectors closed with declines. Six of them fell more than 1.0%.
The early positive bias today was partially related to a buy-the-dip trade following a soft start to the quarter, which was helped by favorable price action in Treasuries following this morning's economic data. The weekly jobless claims report reflected some softening in the labor market. This followed yesterday's softer than expected ISM Services PMI.
Buying picked up further in the Treasury market around the same time that stocks started their descent. The 10-yr note yield fell five basis points to 4.31% and the 2-yr note yield declined four basis points to 4.64%.
- S&P 500:+7.9% YTD
- Nasdaq Composite: +6.9% YTD
- S&P Midcap 400: +6.6% YTD
- Dow Jones Industrial Average: +2.4% YTD
- Russell 2000: +1.3% YTD
Reviewing today's economic data:
- Initial jobless claims for the week ending March 30 increased by 9,000 to 221,000 (consensus 214,000). Continuing jobless claims decreased by 19,000 to 1.791 million.
- The key takeaway from the report is the element of softening seen in the initial claims number; however, initial claims continue to run well below levels associated with a truly weak labor market and a contracting economy.
- The trade deficit in February widened to $68.9 billion (consensus -$66.0 billion) from a downwardly revised -$67.6 billion (from -$67.4 billion) in January. The widening was the result of exports being $5.8 billion more than January exports and imports being $7.1 billion more than January imports.
- The key takeaway from the report, though, is that both exports and imports increased in February, reflecting a pickup in global trade.
- Weekly EIA Natural Gas Inventories showed a draw of 37 bcf versus a draw of 36 bcf last week
Friday's economic calendar features:
- 8:30 ET: March Nonfarm Payrolls (consensus 200,000; prior 275,000), Nonfarm Private Payrolls (consensus 160,000; prior 223,000), Average Hourly Earnings (consensus 0.3%; prior 0.1%), Unemployment Rate (consensus 3.8%; prior 3.9%), and Average Workweek (consensus 34.3; prior 34.3)
- 15:00 ET: February Consumer Credit (prior $19.5 bln)