Stock Market Update

[BRIEFING.COM] The major US equity indices experienced significant declines today, driven by escalating inflation concerns and deteriorating consumer sentiment. The Dow Jones Industrial Average dropped 1.7%, the S&P 500 fell 2.0%, and the Nasdaq Composite registered a 2.7% loss.

The core Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation measure, rose 0.4% in February, equating to a 2.8% annual increase versus 2.7% in January. Also, the final University of Michigan's Consumer Sentiment survey dropped to 57.0 in March, reflecting worsening expectations for personal finances, business conditions, unemployment, and inflation.

Some negative corporate news also contributed to the selling interest in equities. lululemon Athletica's (LULU 293.06, -48.47, -14.2%) shares plunged 14% following a disappointing earnings outlook.

Ten of the 11 S&P 500 sectors closed lower led by communication services (-3.8%), consumer discretionary (-3.3%), and technology (-2.4%). The only sector to close higher was the defensive-leaning utilities sector (+0.8%).

Buying also increased in Treasuries in another manifestation of economic worries. The 2-yr yield sank nine basis points today to 3.91% and the 10-yr yield settled 11 basis points lower at 4.26%. This leaves the 2-yr yield four basis points lower this week and the 10-yr yield one basis points higher this week.

• Dow Jones Industrial Average: -2.3% YTD
• S&P 500: -5.1% YTD
• S&P Midcap 400: -6.6% YTD
• Russell 2000: -9.3% YTD
• Nasdaq Composite: -8.4% YTD

Reviewing today's economic data:

• February Personal Income 0.8% (Briefing.com consensus 0.4%); Prior was revised to 0.7% from 0.9%, February Personal Spending 0.4% (Briefing.com consensus 0.6%); Prior was revised to -0.3% from -0.2%, February PCE Prices 0.3% (Briefing.com consensus 0.3%); Prior 0.3%, February PCE Prices - Core 0.4% (Briefing.com consensus 0.4%); Prior 0.3%
  • The key takeaway from the report is that it was good on the income side, just okay on the spending side (real PCE up just 0.1%), and bad on the inflation side with the uptick in the core-PCE Price Index. That mixed complexion, which is apt to stir some stagflation angst as well, will keep the Fed in a wait-and-watch mode, especially with near-term price adjustments likely as the tariffs take hold.
• March Univ. of Michigan Consumer Sentiment - Final 57.0 (Briefing.com consensus 57.9); Prior 57.9
  • The key takeaway from the report is that the Expectations Index has dropped more than 30% since November 2024. The decline in March featured a clear consensus across all demographic and political affiliations, citing worsening expectations for personal finances, business conditions, unemployment, and inflation.

Looking ahead, Monday's economic data is limited to the March Chicago PMI (prior 45.5) at 9:45 ET.