Closing Market Summary: Piling on the LossesStocks dropped again on Friday, piling on losses for the week; the S&P 500 tumbled 2.1% to 2588.26, the Nasdaq Composite declined 2.4% to 6992.67, and the Dow Jones Industrial Average slid 1.8% to 23533.20 -- its worst close since November 2017. The three major indices finished the week with losses between 5.7% and 6.5%.
Tariff talk carried over into Friday's session after China urged the U.S. to "pull back from the brink" following President Trump's Thursday decision to implement tariffs of up to $60 billion on Chinese imports -- which he says are a response to China's alleged intellectual property theft against U.S. tech companies. Beijing threatened to retaliate with tariffs on 128 U.S. products -- including wine, pork, fresh fruit, ethanol, and steel -- but investors took solace in the fact that those products represent a mere $3 billion of total value -- barely a drop in the bucket.
While fear of a trade war likely played a role in Friday's sell off, several other factors also persuaded buyers to stay on the sidelines, including the understanding that the Fed is operating with a tightening bias, the underperformance of the top-weighted technology and financials sectors, and the continued lack of technical support -- the S&P 500 has been beneath its 50-day simple moving average (2742) since Monday. It's worth noting that the benchmark index finished Friday just a tick above its 200-day simple moving average (2585).
All 11 S&P sectors finished in negative territory, with the financials (-3.0%), technology (-2.7%), and health care (-2.1%) sectors leading the retreat. The energy sector was the top performer, benefiting from a 2.4% increase in WTI crude ($65.87/bbl), but still finished with a loss of 0.6%.
In earnings news, Micron (MU 54.21, -4.71) tumbled 8.0% on Friday despite beating profit estimates for its fiscal second quarter and raising its earnings guidance for Q3, while Dow component Nike (NKE 64.63, +0.21) finished with a gain of 0.3% after reporting better-than-expected earnings and revenues for its fiscal third quarter.
Overseas, equity markets in Asia sold off sharply on Friday, with China's Shanghai Composite and Japan's Nikkei losing 3.4% and 4.5%, respectively. Meanwhile, the major bourses in Europe also finished the week on a broadly lower note, losing between 0.4% and 1.8%. The Euro Stoxx 50 (-1.3%) closed at its lowest level in more than a year.
Reviewing Friday's economic data, which was limited to the February readings for Durable Goods Orders and New Home Sales:
- February durable goods orders climbed 3.1%, which is more than the 1.5% increase expected by the consensus. The prior month's reading was revised to -3.5% (from -3.7%). Excluding transportation, durable orders increased 1.2% (consensus +0.6%) to follow the prior month's revised decrease of 0.2% (from -0.3%).
- The key takeaway from the report is that it showed a welcome rebound in business spending that has mitigated some of the nervousness about the loss of economic momentum seen in the data of late.
- New Home Sales in February hit an annualized rate of 618,000, which is below the consensus of 620,000. The January reading was revised to 622,000 (from 593,000).
- The key takeaway from the report is that new home sales declined for the third consecutive month, but are up 0.5% year-over-year.
Investors will not receive any economic data on Monday.
- Nasdaq Composite: +1.3% YTD
- S&P 500: -3.2% YTD
- Dow Jones Industrial Average: -4.8% YTD
- Russell 2000: -1.7% YTD
