I'm Colette Auclair, and here is Schwab's early look at the markets for Friday, March 13.
Today's a bit like Wednesday, offering some early and critical data that might temporarily redirect investors' attention from overseas strife. The readings come after another dismal session yesterday where major indexes fell to three-month lows as crude oil kept climbing and the war showed signs of persistence.
January's Personal Consumption Expenditures (PCE) price index at 8:30 a.m. ET and the January Job Openings and Labor Turnover Survey (JOLTS) soon after the open provide a double feature on the economy heading into next week's Federal Reserve meeting.
Depending on overnight events in the Middle East and the numbers themselves, these reports could have a market impact or may simply go by with little notice from Wall Street. Almost none of this week's data capture readings taken after the war, meaning much could be discounted.
One exception is today's March preliminary consumer sentiment data from the University of Michigan, due at 10 a.m. ET. Sentiment has been weak for months. The war and its higher gas prices might indicate more gloom in the future, which might show up in this report compiled just after the conflict began.
Analysts expect a drop to 55% for headline sentiment from 56.6% a month ago. Long-term inflation expectations were 3.3% in February, and any uptick there might indicate worsening sentiment around prices as gas began to climb.
Leaving data for a moment, crude and the war remain front and center after global prices hit nearly $100 per barrel Thursday. This came as Iran's supreme leader vowed to keep the Strait of Hormuz blocked and several oil tankers were attacked in Iraq.
Millions of barrels of oil being released by the U.S. and other countries can only make up part of the flow that's tied up in the Persian Gulf, analysts said, and crude may have to climb well above $100 to slow demand.
Unfortunately, demand slowing due to higher prices is what often happens in a recession, though the U.S. economy is less dependent on oil than in the past. Crude is a fungible commodity, meaning U.S. prices aren't protected from global trends. The U.S. still imports a good deal of gasoline each day, for instance.
Perhaps with that in mind, the Trump administration on Thursday said it plans to issue temporary waivers for a century-old maritime law called the Jones Act that requires American-built ships be used to transport goods between U.S. ports. The waivers would last 30 days and allow foreign tankers to help supply refiners on the East Coast with fuel from the Gulf Coast, Bloomberg reported.
As crude rose this week, U.S. Treasury note yields marched higher on inflation concerns--a correlation that might not last because higher crude oil prices historically put pressure on the U.S. economy.
"Eventually, high oil prices are negative for growth," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, or SCFR.
The 10-year Treasury note yield hit 4.25% Thursday for the first time in more than a month and topped 4.27% at times. The January peak was just above 4.31%, a level to watch today.
Shorter-term 2-year and 5-year note yields climbed dramatically Thursday—13 basis points each--amid worries a longer conflict could delay rate cuts. The CME FedWatch Tool now shows the futures market only anticipating a single rate cut this year, and likely not until autumn.
"The Treasury market continues to pay close attention to the oil market and the potential spillover effects for inflation," said Cooper Howard, director of fixed income research and strategy at SCFR. "The longer the situation in the Middle East lasts, the greater likelihood that oil will remain elevated and raise inflation. This likely puts a floor on how much lower longer-term rates can go."
Returning to data, today's PCE could show monthly 0.3% headline growth and 0.4% for core, compared with 0.4% for both in December, according to Briefing.com consensus. Core excludes volatile energy and food costs.
JOLTS will likely be closely watched after jobs growth in February fell 92,000. Consensus is 6.7 million, up slightly from 6.54 million in December. Generally, job openings have tracked downward over the past few years from post-pandemic peaks above 10 million.
In data yesterday, January housing starts and building permits came in mixed with permits dropping more than 5% annually and starts up more than 7%. Starts beat the Briefing.com consensus figure but permits—a measure more aligned with future demand—missed the average estimate.
Initial weekly jobless claims stayed near recent lows at 213,000, possible evidence that layoffs remain light despite AI and war fears. Continuing jobless claims fell 21,000 from the prior week, a potential sign of hiring or of people giving up their job searches.
The U.S. dollar continued its resilience despite higher oil and weaker U.S. equities. It traded at 99.70 late in Thursday's session, the highest level of the year and the strongest price since late November. It last topped 100 on November 25.
The U.S., with its large domestic energy supplies, has some insulation from rising crude and natural gas prices.
This is "a huge reason that we've seen the U.S. dollar rise so much over the past week," said Kevin Gordon, head of macro research and strategy at SCFR. "In any event of geopolitical instability, investors tend to flock to the dollar, and they view it as this perceived haven currency. And that's even truer today."
Adobe shares lost 5% initially in post-market trading despite the software giant reporting better-than expected quarterly earnings and revenue and issued guidance that topped Wall Street's consensus. The company also reported that its CEO of 18 years plans to "transition" from his position once a successor has been appointed. This could be why the stock dipped.
In other corporate news, Monday marks the start of Nvidia's GPU Tech Conference, or GTC, with a speech by CEO Jensen Huang scheduled for 2 p.m. ET that day.
On Thursday, major indexes fell sharply and many closed near their lows. That's a weak signal technically, and so was the S&P 500's drop below 6,700. Another negative sign was the S&P's failure to spend any time at all yesterday above Wednesday's low point, and the lack of dip buyers late in the session. The S&P 500's close was its lowest this year, and the index is now down 2.5% year to date.
Yesterday's close was the weakest for the S&P 500 since November 21, more than three months ago, and now the November closing low of 6,538 could be a level to watch. The 200-day moving average of 6,600 is above that and may be the first point of support on another descent. The S&P 500 hasn't closed below its 200-day moving average since last May.
Eight of 11 S&P 500 sectors fell yesterday, with only energy and the defensive utilities and staples sectors up. Industrials finished last, right behind financials and consumer discretionary as economic growth worries intensified and Goldman Sachs cut its expected U.S. gross domestic product (GDP) forecast by 0.3 percentage points.
In individual trading Thursday, Morgan Stanley fell 4% after Bloomberg reported the firm is limiting redemptions on a private credit fund. Morgan Stanley's North Haven Private Income Fund, which has almost $8 billion in assets, returned around $169 million, or less than half of investors' tender requests, after capping redemptions at 5% of shares, Bloomberg said.
Financial stocks cratered Thursday on the same private credit worries, falling more than 1.5% as a sector. Consumer stocks including airlines, cruise lines, personal luxury item sellers, and auto makers suffered sharp losses Thursday amid economic worries. The chip sector, which had been buoyant earlier this week, lost its footing and fell more than 3%. Transport stocks fell about the same.
Dollar General fell 6% despite earnings that topped consensus and revenue that matched consensus views. Guidance also was in line with expectations. Shares were up sharply since late last year heading into the report.
Dow climbed 9% Thursday and other chemical companies also rose as the war drove up prices for fertilizer components made from chemicals, Barron's reported.
The Dow Jones Industrial Average® ($DJI) cratered 739.42 points Thursday (-1.56%) to 46,677.85; the S&P 500 Index (SPX) plunged 103.18 points (-1.52%) to 6,672.62, and the Nasdaq Composite® ($COMP) gave back 404.15 points (-1.78%) to 22,311.98.