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Weekly Update

Market Summary

Market turbulence continued this past week with the Dow Jones and S&P 500 each ending the shortened week up over 2%, just to cede the majority of those gains in Monday’s trading with losses of 1.9% and 2.2%, respectively. The S&P 500 dropped below its 200-day moving average, a key technical level, for the first time in nearly two years. Selling pressure in the equity markets was driven by global trade tensions and fears of future regulation of tech companies, whereas buyers continued to cite a positive corporate earnings growth outlook on the wings of tax reform and generally positive, albeit slowing, U.S. economic indicators in the first quarter of 2018. Despite economic strength, U.S. equity indices posted their worst quarterly performances since 2015 with the S&P 500 and Dow Jones losing 0.90% and 2.12%, respectively (including dividends). Global equity markets also ended the quarter down as a whole with a 1.28% loss per the MSCI World index.

In response to the Trump administration's recently implemented tariffs on steel and aluminum, China has retaliated with tariffs on imports of 128 American-made products, such as pork, fruit, and a wide variety of other goods. The tariffs, which are as high as 25%, went into effect on Monday. However, China also urged negotiations to resolve the trade dispute.

This week brings a host of new data for the market to chew on, including vehicle sales, mortgage applications, employment metrics, and broad service and good supply and demand metrics.

Economic Highlights

  • Inflation:  U.S. Core personal consumption expenditures (PCE) rose by 1.6% year-over-year. This index, which is the Fed’s preferred measure of inflation, has been below the Fed’s 2% target since July 2012 but is at its highest point in the past year.
  • Growth: US GDP for 4Q 2017 was revised upward to 2.9% year-over-year from the prior reading of 2.5%. The revision was driven by better than anticipated inventory levels and consumer spending during the holiday season. Consumption, which comprises about two-thirds of GDP, was revised up to 4.0% from its prior reading of 3.8%.
  • Consumer Sentiment: The US Conference Board Consumer Confidence Survey declined to 127.7 in March from an 18-year high of 130.0 in February and below the consensus estimate of 131. The lowered reading reflects the public’s reaction from February equity market volatility, but remains at a historically high level.
  • Employment: US weekly unemployment claims declined to 215,000, the lowest point since 1973, which indicates a strong and tightening labor market.

US Economy - The Week Ahead

Tuesday, 4/3/2018

Light Vehicle Sales – Consensus Estimate: 16.9 million

Wednesday, 4/4/2018

ADP Employment Change – Consensus Estimate: 205,000

Services Purchasing Managers’ Index (PMI) – Consensus Estimate: 54.3, Prior: 54.1

ISM Non-Manufacturing Composite – Consensus Estimate: 59.0, Prior: 59.5

Factory Orders – Consensus Estimate: 1.7% month-over-month growth, Prior: -1.4% month-over-month growth

Thursday, 4/5/2018

Initial Jobless Claims – Consensus Estimate: 225,000, Prior: 215,000

Trade Balance – Consensus Estimate: -$56.5 billion, Prior: -$56.6 billion

Friday, 4/6/2018

Nonfarm Payroll – Consensus Estimate: 189,000, Prior: 313,000

US Unemployment – Consensus Estimate: 4.00%, Prior: 4.10%

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