US close: Stocks end volatile session at day's lows

The main US stockmarket gauges finished at their session lows in a volatile day of trading on Wall Street, with traders' attention firmly on the flattening US yield curve as economists moved to factor-in a more dovish outlook for interest rates in the States in the wake of the Federal Reserve's policy meeting two days before.

Adding to the selling pressure were weak German manufacturing figures that appeared to spark worries about global growth, adding to traders' incentive to seek out the relative safety of the fixed income space, with equity strategists somewhat divided on how sustained Friday's losses would turn out to be.

Belying that caution, data from Bank of America-Merrill Lynch the day before revealed that investors had continued to rotate from from stocks to bonds, to the tune of $20.7bn of outflows from the former.

BofA-ML strategists however were undaunted, quite the opposite, telling clients that S&P 500 would rise past the 3,000 point mark in the front half of the year.

Against that backdrop, by the end of trading the Dow Jones Industrial Average was down 1.77% to 25,502.32, alongside a drop of 1.90% on the S&P 500 to 2,800.71 while the Nasdaq Composite fell 2.5% to 7,642.67.

Meanwhile, the CBoE volatility index was 20.91% higher at 16.48.

"Extraordinary abrupt end to central bank hiking cycle + Fed paranoia of credit event is uber-bullish credit & uber-bearish volatility [...] 40 global central bank hikes in 2018, S&P 500 PE multiple -4 points; end of tightening in 2019 consistent with equity market re-rating; S&P500 multiple has risen from 14.6 to 16.6 this year (today S&P500 2843 & EPS $171)... higher multiples likely," said strategists at BofA-ML.

In parallel, the spread between two and 10-year benchmark Treasury note yields narrowed to just eight basis points, while the difference between three-month T-bill and 10-year Treasuries fell into negative for the first time since 2007, sparking talk of an economic recession in the not too distant future.

Contributing to souring investor sentiment, earlier IHS Markit reported that its euro area manufacturing sector Purchasing Managers' Index plumbed a 71-month low in March amid a "marked" decline in export orders, while that for Germany dropped to a 79-month low. Brexit concerns were also high on the agenda, with the above data helping to underscore the same.

The data out of the Eurozone also sent the Greenback sharply higher, with the US dollar spot index ending the day up by 0.16% to 96.65.

On the following Sunday, Erik F. Nielsen chief economist at UniCredit Research, would tell clients: "the extremely mature US expansion is on life-support from the fiscal boost (which surely will run out), valuations across equities and credits are very stretched – and the forward earnings estimates have been coming down quite rapidly.

"Our Cross Asset Strategist, Elia Lattuga, has written extensively on the need to use the rally these past couple of months to turn much more defensive."

As the yield curve narrowed, shares of lenders were walloped, with the KBW bank sector index down by 3.92%, alongside a 6.36% decline in an index of Footwear companies and a retreat of 5.75% for non-ferrous metals.

To rake note of, IHS Markit's manufacturing purchasing managers' index for Germany fell to 44.7 in March from 47.6 in February, missing expectations for a reading of 48.0.

The same survey compiler's Principal economist, Phil Smith, said: "Uncertainty towards Brexit and US-China trade relations, a slowdown in the car industry and generally softer global demand all continue to weigh heavily [...]."

IHS Markit also published its US factory sector PMI on Friday, which fell from a reading of 53.0 for February to 52.5 in March - a 21-month low.

In corporate news, Nike shares were off 6.6% after its third-quarter numbers late on Thursday.

CMC Markets UK analyst David Madden said: "Adjusted EPS were 68 cents, which topped the 65 cent forecast, and revenue was $9.611 billion, broadly in line with forecasts. The Converse brand saw a 2% dip in sales, and that worried some investors."

Biogen was another standout faller, after multiple brokers, including Morgan Stanley and UBS, came out with negative calls for the biotech giant.

Tiffany's was up 3.15% after the jeweller's fourth-quarter earnings beat analysts' expectations, but sales were a miss.

Hibbett Sports saw its shares surge 20% as its fourth-quarter earnings topped forecasts.

Elsewhere, BlackRock was in focus following reports that it is advanced talks to buy French software company eFront for between $1bn and $1.5bn in a deal that could be announced within days.

But it wasn't all bad news for the US economy on Friday, with the National Association of Realtors reporting that existing home sales jumped by 11.8% in February from the month before to reach an annualised rate of 5.51m (consensus: 5.1m), bolstered by lower mortgage rates, growing incomes and improved consumer confidence.

Related to the above, Minneapolis Fed chief, Neel Kashkari, was reportedly making 'dovish' sounding noises, saying he wasn't sure whether the slowdown is real or just a blip.

Dow Jones - Risers

Verizon Communications Inc. (VZ) $59.76 2.52%
Coca-Cola Co. (KO) $45.93 0.92%
Travelers Company Inc. (TRV) $134.90 0.39%
McDonald's Corp. (MCD) $186.81 0.24%
Walt Disney Co. (DIS) $108.23 -0.40%
Home Depot Inc. (HD) $188.75 -0.64%
Walmart Inc. (WMT) $98.28 -0.79%
Merck & Co. Inc. (MRK) $82.29 -0.80%
Procter & Gamble Co. (PG) $101.66 -0.81%
Johnson & Johnson (JNJ) $136.91 -0.86%

Dow Jones - Fallers

Nike Inc. (NKE) $82.19 -6.61%
Boeing Co. (BA) $362.17 -3.72%
Dowdupont Inc. (DWDP) $53.92 -3.58%
JP Morgan Chase & Co. (JPM) $99.76 -3.02%
Goldman Sachs Group Inc. (GS) $188.96 -2.89%
Microsoft Corp. (MSFT) $117.05 -2.64%
Intel Corp. (INTC) $53.26 -2.53%
Caterpillar Inc. (CAT) $129.77 -2.44%
3M Co. (MMM) $204.66 -2.36%
Cisco Systems Inc. (CSCO) $52.74 -2.22%

S&P 500 - Risers

ConAgra Brands Inc (CAG) $26.45 15.50%
Campbell Soup Co. (CPB) $38.24 5.29%
Fidelity National Information Services Inc. (FIS) $110.41 3.43%
Tiffany & Co. (TIF) $103.21 3.15%
FirstEnergy Corp. (FE) $41.77 2.91%
American Electric Power Co. Inc. (AEP) $85.14 2.74%
Entergy Corp. (ETR) $96.12 2.73%
Verizon Communications Inc. (VZ) $59.76 2.52%
J. M. Smucker Co. (SJM) $114.30 2.43%
Exelon Corp. (EXC) $50.28 2.40%

S&P 500 - Fallers

Frontier Communications Co. (FTR) $2.20 -8.71%
Murphy Oil Corp. (MUR) $28.52 -7.91%
Affiliated Mgrs Group (AMG) $99.16 -7.33%
Citizens Financial Group, Inc. (CFG) $31.77 -7.27%
Mallinckrodt Plc Ordinary Shares (MNK) $22.09 -7.18%
United Rentals Inc. (URI) $110.95 -6.80%
Comerica Inc. (CMA) $72.07 -6.71%
Nike Inc. (NKE) $82.19 -6.61%
Western Digital Corp. (WDC) $48.39 -6.55%
Cintas Corp. (CTAS) $194.55 -6.52%

Nasdaq 100 - Risers

Mondelez International Inc. (MDLZ) $49.13 0.51%
Dollar Tree Inc (DLTR) $101.43 0.02%
Shire Plc Ads (SHPG) $179.20 0.00%
Starbucks Corp. (SBUX) $71.96 -0.42%
Marriott International - Class A (MAR) $124.50 -0.45%
T-Mobile Us, Inc. (TMUS) $71.90 -0.50%
Vertex Pharmaceuticals Inc. (VRTX) $181.53 -0.56%
Fiserv Inc. (FISV) $85.58 -0.57%
Check Point Software Technologies Ltd. (CHKP) $125.43 -0.58%
Verisk Analytics Inc. (VRSK) $128.89 -0.67%

Nasdaq 100 - Fallers

Western Digital Corp. (WDC) $48.39 -6.55%
Cintas Corp. (CTAS) $194.55 -6.52%
Micron Technology Inc. (MU) $41.62 -5.39%
Biogen Inc (BIIB) $216.71 -4.48%
Netflix Inc. (NFLX) $361.01 -4.46%
Seagate Technology Plc (STX) $46.93 -4.19%
Skyworks Solutions Inc. (SWKS) $82.59 -4.04%
Align Technology Inc. (ALGN) $269.62 -3.96%
Sirius XM Holdings Inc (SIRI) $5.76 -3.68%
Ctrip.Com International Ltd. Ads (CTRP) $40.26 -3.66%