After rising most of the week, U.S. stocks gave it all back on Friday, with the major equity averages all dropping more than 2% to end the week as the war of words between America and China heated up.
The Dow ended the week lower by 0.7% after losing 2.3% Friday, while the S&P 500 was off by 1.4% after Friday’s 2.2% drop. NASDAQ, which has been the weakest performer the past three weeks, lost 2.3% Friday and 2.1% for the week. Year to date, the Dow is now off 3.2% in price terms while the S&P is down 2.6%. NASDAQ is still positive but just barely, up 0.2%. Treasury bond yields ended the week higher on the week but well off their peaks as investors sought safety. For example, the benchmark 10-year T-note closed Friday at 2.78%, up four basis points on the week but down nearly six bps on the day.
Foreign markets ended mostly higher for the week – except in China, notably – but they had already closed by the time the heaviest selling had started in the U.S. on Friday. TheStoxx Europe 600 ended the week higher by 1.1% after climbing 2.4% on Thursday, its biggest one-day gain since June 2016. Japanese stocks rose 0.5%. But Shanghai was down 1.2% and Hong Kong was off 0.8%. On Friday China said it was “fully prepared to hit back forcefully and without hesitation” after President Trump said he was considering imposing tariffs on $100 billion more of Chinese imports. There were also reports that Chinese growth forecasts for this year were being pared back.
The March U.S. jobs number released Friday was a bit disappointing, but the bar had been set pretty high following several months of strong performance. Nonfarm payrolls rose by just 103,000, far below the 175,000 the Street was looking for and well under the lowest individual forecast. On the bright side, the prior month’s already robust total was revised upward by another 13,000 to 326,000. The labor participation rate fell a tenth of a percentage point to 62.9% after climbing by three-tenths a month earlier. The unemployment rate held steady at 4.1%, although the Street was expecting it to fall to 4.0%. Average hourly earnings met forecasts of a 0.3% monthly increase, 2.7% versus a year earlier.
Other economic reports released last week came in weaker than expected, although, like the jobs number, they were mostly coming in against lofty prior numbers. The Institute for Supply Management’s two indexes fell slightly in March. The nonmanufacturing gauge, which covers most of the economy, fell to 58.8 from 59.5 the prior month, while the manufacturing index slipped to 59.3 from 60.8; both figures were a bit shy of forecasts. Separately, factory orders rebounded 1.2% in February from January’s 1.3% decline but the increase was a little weaker than expected. Construction spending rose a less-than-expected 0.1% in February. But auto sales bucked the trend, rebounding in March by 6.3% to 1.6 million units; the annual selling rate rose to 17.5 million vehicles, well ahead of the 16.9 million consensus forecast.
Reports/dates/facts/links worth paying attention to over the next week:
1. April 10: Producer price index for March.
2. April 11: Consumer price index for March; the minutes of the Federal Reserve’s March 21 monetary policy meeting are released at 2:00 P.M. EST.
3. April 12: Weekly unemployment claims.
4. April 13: University of Michigan consumer sentiment index for April, first reading.