Stocks Retreat Amidst Tepid Data

Stocks Retreat Amidst Tepid Data

With the exception of the NASDAQ 100, US stock indices moved lower on Thursday, as market participants considered the forward guidance provided yesterday in the Fed statement and data showing modest improvements in the economy.  



Stocks Retreat Amidst Tepid Data
Stocks Retreat Amidst Tepid Data

The wording of the Fed statement that came out of March’s FOMC meeting was tweaked from the previous statement to help shape expectations for a rate rise. A key sentence changed from February’s ‘the Committee judges that it can be patient in beginning to normalize the stance of monetary policy’ to ‘the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting.’ There is no May FOMC meeting, so this puts the June meeting sharply into focus.

The decision of whether to introduce an increase will be based on an assessment of how much progress has been made in achieving the Fed’s goals of maximum employment and price stability – in other words, it will be dependent on the incoming data, as we would expect. At the moment, the incoming data paints a picture of an economy that continues to improve, but at an underwhelming pace.

The weekly jobless claims report showed initial claims rose 1000 last week to 291,000, while the four-week moving average bumped up to 304,750 from 302,500. The week in question is also the sample week that will be used by the Labor Department in compiling its March employment situation report, and comparing it to the corresponding period in February, we have actually seen a slight deterioration: the four-week moving average back then was 283,000 and initial claims for the week were 282,000. February’s payroll growth was unusually large at 295,000 though.

The Philly Fed’s general business conditions index, a measure of the manufacturing sector in its district, was little changed in March at 5.0 (versus 5.2 in February), with softness in new orders and shipments contributing to the overall slow conditions. This further evidence of the strength of the dollar impinging on the manufacturing sector, provides agreement with other early indicators for March, such as the Empire State Manufacturing survey, which earlier in the week showed slowing growth. We get a reading on nationwide manufacturing conditions for this month next Tuesday with the PMI manufacturing flash.

By mid-afternoon, the Dow Jones was down 115 points or 0.63% at 17,961, while the S&P 500 fell 0.47% to 2089.6.  Today was the first day with Apple ($AAPL) being part of the Dow Jones, having taken the place of AT&T in the blue chip index.


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