The S&P 500 fell 1.6% on Thursday, slumping into the close on no specific news catalyst. The Nasdaq Composite (-1.5%) and Dow Jones Industrial Average (-1.6%) fell comparably while the Russell 2000 fell 1.0%.
The weak finish pushed all 11 S&P 500 sectors into the red on a closing basis, with the financials (-2.3%) and communication services (-2.0%) sectors losing at least 2.0%. The utilities (-0.2%) and consumer staples (-0.4%) sectors outperformed on a relative basis with modest declines.
The session was influenced by profit-taking activity after a strong second half of March, quarter-end machinations, and a 7% drop in oil prices ($100.43, -7.24, -6.7%) after the White House laid out plans to release one million barrels of oil per day for the next six months to help alleviate gas prices.
On a related note, OPEC+ agreed to increase its output targets by 432,000 barrels per day in May, according to CNBC. That’s slightly more than the 400,000-bpd schedule for April.
Inflation remained on the market’s mind after PCE data for February rose in-line with expectations, further crimping real personal disposable income, which decreased 0.2% in February. On a year-over-year basis, the PCE Price Index was up 6.4% while the core PCE Price Index, which excludes food and energy, was up 5.4% – its highest level since 1983.
The Treasury market didn’t react to the inflation data, perhaps because it wasn’t surprising or because investors preferred to hide out in bonds amid the negative bias in equities ahead of the employment report tomorrow. The tight spreads continued to weigh on the financials sector for profitability reasons.
The 2-yr yield decreased five basis points to 2.28%, and the 10-yr yield decreased three basis points to 2.33%. The U.S. Dollar Index rose 0.6% to 98.37. The CBOE Volatility Index increased 6.4% to 20.56.
Separately, Walgreens Boots Alliance ( WBA 44.77, -2.69, -5.7%) fell 6% despite the Dow component beating top and bottom-line estimates while UiPath ( PATH 21.59, -7.45, -25.7%) was the latest growth stock to take a plunge after providing disappointing guidance.
Reviewing Thursday’s economic data:
- Personal income increased 0.5% month-over-month in February (Briefing.com consensus 0.5%), though real personal disposable income was down 0.2%. Personal spending increased 0.2% (Briefing.com consensus 0.5%) while the personal savings rate as a percentage of disposable income increased to 6.3% from a revised 6.1% (from 6.4%) in January. Real personal spending was down 0.4%. The PCE Price Index was up 0.6% (Briefing.com consensus 0.6%), pushing the year-over-year rate to 6.4% from 6.0%. The core PCE Price Index, which excludes food and energy, was up 0.4% (Briefing.com consensus 0.4%), pushing the year-over-year rate up to 5.4% from 5.2% in January.
- The key takeaway from the report is that inflation continues taking a bite out of wage gains, as real personal disposable income decreased 0.2% while the Core PCE Price Index rose to its highest level since 1983.
- Initial jobless claims for the week ending March 26, increased by 14,000 to 202,000 (Briefing.com consensus 200,000), rising off their lowest level since September 1969. Continuing jobless claims for the week ending March 19 decreased by 35,000 to 1.307 million, a level not seen since December 27, 1969.
- The key takeaway from the report is that with claims hovering at levels not seen since late 1969/early 1970, the labor market remains tight, which can serve as a tailwind to already-high inflation.
- The Chicago PMI for March increased to 62.9 (Briefing.com consensus 56.8) from 56.3 in February.
Looking ahead, investors will receive the Employment Situation report for March, the ISM Manufacturing Index for March, and Construction Spending for February on Friday.
- Dow Jones Industrial Average -4.6% YTD
- S&P 500 -5.0% YTD
- Russell 2000 -7.8% YTD
- Nasdaq Composite -9.1% YTD
Overseas:
- Europe: DAX -1.3%, FTSE -0.8%, CAC -1.2%
- Asia: Nikkei -0.7%, Hang Seng -0.8%, Shanghai -0.4%
Commodities:
- Crude Oil -7.24 @ 100.43
- Nat Gas +0.06 @ 5.64
- Gold +16.10 @ 1953.00
- Silver +0.08 @ 25.07
- Copper +0.01 @ 4.75