Weighed down by fears of a global trade war and apparent disorder in the White House, stocks fell last week.
As has been the pattern lately, stocks were mostly higher on Friday but that couldn’t make up for losses earlier in the week. The Dow was down 1.5% for the week while the S&P 500 fell 1.2% and NASDAQ shed an even 1.0%. The major averages have now fallen two of the past three weeks. Year to date, NASDAQ is up a strong 8.6%, well ahead of the S&P’s 3.4% gain and the Dow’s 1.5% rise. Foreign stocks were narrowly mixed. The Stoxx Europe 600 lost 0.1%. Japanese stocks rose 1.0% while Shanghai lost 1.1% and Hong Kong gained 1.6%.
The U.S. Treasury bond market was mixed, with yields higher on the short end and lower on the long end as the market anticipated the Federal Reserve monetary policy meeting this week. The 11-basis point spike in the yield on the three-month T-bill would seem to augur an increase at the Fed meeting, the first under new chair Jerome Powell. But yields were lower at the other end of the curve, with the benchmark 10-year note ending the week at 2.84%, down five bps on the week after having been lower by as much as 10 bps earlier in the week. The 30-year bond closed down eight bps to 3.08%. Recent assessments of U.S. economic growth for the first quarter have been scaled back to below 2%, largely due to concerns about American tariffs on foreign goods and possible retaliation by U.S. trading partners. Powell’s post-meeting comments may shed some light on future Fed policy in response to those moves.
Reports on the U.S. economy were mixed, with consumer indicators mostly weaker than expected but more general numbers better than forecast. Retail sales fell for the third straight month, declining 0.1% in February, well below the 0.4% increase the Street was expecting. However, the headline number was skewed by a decline in auto and gasoline sales; excluding those categories, total sales were up 0.3%. Both housing starts and building permits fell sharply last month, with starts dropping 7.0% to an annual rate of 1.236 million units while permits fell 5.7% to 1.298 million. The Street was expecting more modest declines in both areas. Multifamily construction, which can be volatile month to month, dropped 26.1% after rising nicely the prior month. Not surprisingly, then, the National Association of Home Builders’ builder confidence index fell a point in March to 70, slightly below forecasts. But on the positive side, the first reading for the University of Michigan’s consumer sentiment index jumped more than two points this month to 102.0, a 14-year high and well above expectations. More generally, industrial production rebounded strongly in February, climbing 1.1%, the largest gain in four months and well above the consensus estimate. Capacity utilization rose to 78.1%, its highest level since January 2015. On the inflation front, both the consumer and producer price indexes rose 0.2% in February.
Reports/dates/facts/links worth paying attention to over the next week:
1. March 20: The Federal Reserve opens its two-day monetary policy meeting in Washington.
2. March 21: Existing home sales for February; the Fed meeting ends at 2:00 P.M., followed by meeting announcement, updated economic forecasts, and Jerome Powell’s first press conference as Fed chair.
3. March 22: Weekly unemployment claims; leading economic indicators for February.
4. March 23: New home sales for February; durable goods orders for February.
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