Stock Market Update

[BRIEFING.COM] The stock market is in a steady decline with the major indices showing losses ranging from 1.6% to 2.6%. The broad-based retreat is in response to this morning's economic releases. 

Inflation measured by the core-PCE Index, the Fed's preferred read, increased 0.4% month-over-month, which left it up 2.8% year-over-year versus 2.7% in January. Also, the final March University of Michigan Index of Consumer Sentiment declined to 57.0 from the preliminary reading of 57.9. The survey data reflected worsening expectations for personal finances, business conditions, unemployment, and inflation.

Just about everything is coming along for the downside ride with mega caps and chipmakers leading the charge. The Vanguard Mega Cap Growth ETF (MGK) is 2.6% lower and the PHLX Semiconductor Index (SOX) shows a 3.2% decline, hitting a fresh 52-week low. 

This price action has contributed to the declines in the communication services (-3.3%), consumer discretionary (-3.2%), and technology (-2.5%) sectors. On the flip side, today's risk-off bias has resulted in the relative outperformance of defensive-oriented sectors. The utilities sector trades 0.8% higher while the health care and consumer staples sectors trade just below prior closing levels. 

Buying has also increased in Treasuries in another manifestation of economic worries. The 10-yr yield is down nine basis points to 4.26% and the 2-yr yield is down nine basis points to 3.91%.

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.