Sharp sell-offs on Monday and today wiped away gains from the middle of the week. Trade talk, disappointing jobs reports and Fed comments all led to today’s poor performance. For the week, the Dow declined 0.7% while the S&P 500 declined 1.4%.
Trade talk continued to dominate financial headlines this week. Trade fears fueled the sharp downturn on Monday, but by mid-day Tuesday rumors of behind-the-scene trade negotiations between the US and China eased concerns. But then Trump announced this morning he wanted to study the effects of another $100 billion in Chinese products subject to tariffs. It’s hard to understand the goal here. Trade is critically important to the US and global economy. This back and forth retaliation would be a large net loss for both the US and China, and yet here we are. Read More
The jobs report disappointed this morning, with the economy adding only 103k net new jobs in March. This was well below the 175k consensus estimate. Wage growth was reasonably strong though, growing at a 2.7% annualized rate. The jobs figures for January and February were also revised lower by a total of 50k jobs. The unemployment rate remained at 4.1%. While the jobs report was weaker than expected, Fed Chairman Powell stated this afternoon that the economy remains strong and ready for additional interest rate increases this year. Read More
I posted this on my business Facebook page yesterday. We’re over two months into the current market correction. Every correction is different and the issues driving them change, but it can be beneficial to study how past corrections behaved. I looked at the last four corrections to see how the current one compares in length and severity. This data suggests we’ve got several more months to go before working through this volatile period. It also shows that this correction (so far) has been pretty mild relative to others in the past decade. No one knows what the future holds, but if we have hit the bottom, we reached it significantly faster than the prior four corrections. We hit the low point 13 days after the late January high while the average correction has taken 138 days to set a bottom. We’re only 70 days from the all-time highs reached in late January. Over the past four corrections, it has taken an average of 268 days to exceed the prior high. You can see the chart here and follow me on Facebook if you’re interested.
Oil decreased 4.7% this week to close at $61.88/barrel. The yield on the 10-yr Treasury moved higher to 2.78% from 2.74% last week. The average rate on a 30-yr fixed rate mortgage moved lower to 4.40% from 4.44% a week ago.