U.S. Indices closed notably in the red on Friday on Friday with US equities hit across the board but with the Nasdaq underperforming. The vast majority of sectors were red, with steep losses seen in Communication, Consumer Discretionary and Technology – homes of the mega-cap stocks. The Utility sector was the only sector to close in the green, with Real Estate, Health Care and Consumer Staples also “outperforming” but still red with the haven nature of the sectors limiting the losses. There was likely some influence of month/quarter-end at play but also the market moves come ahead of a key risk week. US President Trump’s “Liberation Day” is on April 2nd where we are expecting the announcement on reciprocal tariffs. Aside from trade/tariff updates, NFP is due Friday with the ISM PMI data also due this week. The major update on trade today was reports from Bloomberg that the EU is planning concessions for Trump after the reciprocal tariffs hit, according to sources. This supported the Euro and weighed on the Dollar. Elsewhere in FX, the Japanese Yen was the clear outperformer due to the risk off trade but also after the hot Tokyo CPI overnight. Elsewhere, focus today was on the February PCE data, which saw the headline in line, but core PCE (Fed’s preferred gauge of inflation) rose above analyst forecasts – albeit in line with Fed Chair Powell’s estimate. Meanwhile, Consumer Spending missed expectations and Personal Income rose above forecasts. Further signs of distress in the consumer came after the Final University of Michigan Consumer Survey for March. Headline sentiment was revised down, while inflation expectations were revised up. This further hit equities with the selling pressure seen extending throughout the session into the closing bell. The risk off tone of trade supported Treasuries with 10yr T-Note futures reclaiming 111-00 with yields trading around 4.26% to end the weak, off the 4.4% peak seen on Thursday. Oil prices settled in the red due to the risk environment but off lows after Reuters sources reported negotiations to resume Kurdish oil exports through Iraq-Turkey pipeline hit a snag. Elsewhere, Lululemon (LULU) shares tumbled after woeful guidance while CoreWeave (CRWV) opened at USD 39/shr, beneath the IPO price of USD 40/shr. Headline PCE was in line with expectations and the prior, rising 0.3% M/M and 2.5% Y/Y. The core metrics, however, rose 0.4% M/M and 2.8% Y/Y, above analyst forecasts of 0.3% and 2.7%, respectively, although in line with Fed Chair Powell’s estimate of 2.8% on the Y/Y print, while the prior was revised up to 2.7% from 2.6%. Although core PCE, the Fed’s Preferred gauge of inflation, it did not change the dial too much. The latest FOMC projections see Core PCE at 2.8% by year-end, suggesting little progress is to be expected this year – likely due to the implementation of new tariff policies from US President Trump, although there is still a lot of uncertainty around the tariffs and their impact. Elsewhere in the report, personal spending rose 0.1% on a real basis and 0.4% on an adjusted basis, beneath the 0.5% forecast with prior revised down to -0.3% from 0.2%, further evidence of some slowdown in the consumer. Personal Income however rose 0.8%, above the 0.4% consensus although the prior was revised down to 0.7% from 0.9%. Although Personal income was hot, the Fed has told us many times that the labour market is not a source of inflationary pressures, so it should not be too concerned regarding the inflation outlook. However, the Fed is concerned about the inflationary impact from tariffs, but if it is a one-time price increase, then Powell has said they would not act to such an increase. The spending cut and tariff uncertainty is also weighing on the economic outlook which is raising fears of stagflation. The latest Atlanta Fed GDPNow model is tracking growth at -2.8%, with the gold adjusted model at -0.5%. Fed Chair Powell reiterated last week that the Fed can cut rates more quickly if the labour market deteriorates or inflation falls too quickly, or they can hold for longer if inflation progress is slow. The University of Michigan final March revisions for Consumer Sentiment were poor, as the headline was revised lower to 57.0, beneath the expected, and prior, 57.9. Forward-looking expectations also dropped to 52.6 from 54.2, while current conditions marginally lifted to 63.8 from 63.5. The report adds that this month’s decline reflects a clear consensus across all demographic and political affiliations, and consumers continue to worry about the potential for pain amid ongoing economic policy developments. Notably, two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009. Further adding to the grim report, inflation expectations lifted with 1 year ahead to 5.0% (prev. 4.9%) and 5 year to 4.1% (prev. 3.9%), with the latter hitting a 32-year high. For the record, March’s increase in inflation expectations was seen across all three political affiliations. Fed Member Barkin said that the current “moderately restrictive” policy stance is a good place to be, and if conditions change, the Fed can adjust accordingly. He noted that in the current environment, it is hard to imagine the economy breaking toward significantly more hiring. On inflation and tariffs, the Richmond Fed President warned that the recent period of high inflation could mean tariffs have a greater price impact than in the past, though it’s still unclear where rates will ultimately settle or how businesses and consumers in affected countries will respond. He emphasised that federal government policy is now at the centre of the conversation, with the pace of change creating a sense of instability and uncertainty. Barkin cautioned that this heightened uncertainty could weigh on consumer and business spending, and the Fed is waiting for greater clarity before taking further action. Barkin also commented on the impact of auto tariffs, saying his instinct is that the headline tariff number likely won’t fully translate into higher prices for consumers due to factors like market competition, exchange rates, and other factors. He said that auto companies may struggle to pass on costs, given intense price competition, and that they may have less pricing power than expected. Barkin acknowledged the clear inflationary risks of tariffs but also highlighted possible labor market implications if companies respond by cutting costs. He expects any resulting softness in business demand to show up more in capital spending and hiring decisions. Barkin is not as confident that lowered sentiment will change consumer spending, as he is not yet seeing it in the credit card data. He understands the argument that tariffs would involve a one-time shift in the price level, but he will be watching carefully on how businesses and consumers react. Barkin stressed to not start with the assumption that this will involve a one-time change in prices. Elsewhere, Oil closed 0.8% lower while Gold was firm, closing at a new all-time high with a gain of 0.9%.
To mark my 3150th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it lost 790 points on Friday and is now ahead by 2044 points for March after closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 1.97% lower at a price of 5580.
The Dow Jones Industrial Average closed 715 points lower for a 1.69% loss at a price of 41,583.
The NASDAQ 100 closed 2.61% lower at a price of 19,281.
The Stoxx Europe 600 Index closed 0.77% lower.
Last Friday, the MSCI Asia Pacific closed 1.2% lower.
Last Friday, the Nikkei closed 1.81% lower at a price of 37,120.
Currencies
The Bloomberg Dollar Spot Index closed 0.31% lower.
The Euro closed 0.4% higher at $1.0822.
The British Pound closed 0.4% higher at 1.2935.
The Japanese Yen rose 0.3% closing at $149.80.
Bonds
Germany’s 10-year yield closed 5 basis points lower at 2.73%.
Britain’s 10-year yield closed 2 basis points lower at 4.71%.
U.S.10 Year Treasury closed 10 basis points lower at 4.25%.
Commodities
West Texas Intermediate crude closed 08% lower at $69.36 a barrel.
Gold closed 0.9% higher at $3084.10 an ounce.
This morning on the Economic Front we have German Retail Sales at 7.00 am, followed by U.K. Money Supply and Net Lending to Individuals. Next, we have German CPI at 1.00 pm and U.S. Chicago PMI at 2.45 pm. Finally, we have the Dallas Fed Manufacturing Index at 3.30 pm.
Recent Comments