Zinger Key Points
- Lower-than-expected ADP employment growth and ISM Services PMI raised recessionary concerns.
- Long-dated Treasuries rallied, and defensive stocks outperformed cyclical ones.
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Market sentiment turned broadly risk-off Wednesday amid mounting concerns about an impending economic downturn after the job market showed indications of cooling and surveys on manufacturing and services sectors missed expectations.
Investors flocked to safe assets, favoring Treasuries and gold over stocks, large caps over small caps and defensive industries over cyclical ones.
Cues From Wednesday's Trading:
The S&P 500 index lost 0.4%, falling below 4,100 points, and the Dow Jones Industrial Average edged marginally up by 0.1%, as investors seek large-cap and quality stocks.
The tech-heavy Nasdaq 100 lost 1.3%, while the small caps in the Russell 2000 index dipped 1.5%.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq Composite | -1.3% | 11,975.65 | |
| S&P 500 Index | -0.4% | 4,084.53 | |
| Dow Industrials | +0.1% | 33,471.76 |
Analyst Color:
Mega-cap technology stocks have come to serve as something of a new safe haven, and March’s market distress certainly provided an opportunity in that regard, said Daniel Berkowitz, investment director at Prudent Management Associates.
He noted that technology stocks, and growth stocks more broadly, have experienced a strong run this year.
The strength also reflected declining yields, which have been a strong buoy for growth stocks, he added.
Wednesday's Trading In Major US Equity ETFs:
In midday trading Wednesday, the SPDR S&P 500 ETF Trust SPY lost 0.34% to $407.30, the SPDR Dow Jones Industrial Average ETF DIA was 0.3% higher to $334.81 and the Invesco QQQ Trust QQQ edged 1.2% down to $315.41, according to Benzinga Pro data.
Among U.S. equity sectors, the Utilities Select Sector SPDR Fund XLU was the best performer for the second straight session, up by 2.5%. Other traditional defensive sectors, such as the Health Care Select Sector SPDR Fund XLV, and the Consumer Staples Select Sector SPDR Fund XLP, also rose 1.6% and 0.8%, respectively.
The Consumer Discretionary Select Sector SPDR Fund XLY, was the worst performer of the day, down 1.9%, followed by the Technology Select Sector SPDR Fund XLK, down 1.4%.
Latest Economic Data:
The Mortgage Bankers Association’s (MBA) reported a decline of 4.1% in mortgage applications in the week ending March 31. The average contract interest rate for 30-year fixed-rate mortgages marginally eased from 6.45% to 6.4%.
The ADP reported 145,000 jobs added by U.S. private companies in March 2023, down from 261,000 in February and significantly below forecasts of 200,000, indicating signs of labor market cooling.
The Commerce Department showed that the U.S. trade deficit widened to $70.5 billion in February of 2023, hitting four-month highs and slightly above forecasts of a $69-billion deficit.
The S&P Global US Composite PMI was revised lower from the preliminary estimate of 53.3 to 52.3 in March 2023. Similarly, the S&P Global US Services PMI was also revised lower to from a preliminary estimate of 53.8 to 52.6 in March 2023.
The Institute for Supply Management’s non-manufacturing purchasing managers’ index fell from 54.5 in February to 51.2 in March, widely missing expectations of 55.1.
The latest US Energy Information Administration data showed that U.S. crude oil stocks declined by 3.739 million barrels in the week ending March 31, 2023, more than what market expected (2.329 million barrels). Stocks of gasoline fell by 4.118 million barrels, following a 2.904-million barrel draw in the previous week.
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Stocks In Focus:
MarketAxess Holdings, Inc. MKTX plummeted 12%, on pace for the worst trading session since March 2021 after the company issued monthly volume statistics.
Tradeweb Market, Inc. TW tumbled 8% after reporting monthly trading volumes.
Albemarle Corp. ALB fell 8% after BofA Securities downgraded the company from Neutral to Underperform, lowering the price target from $262 to $195.
Johnson & Johnson JNJ rose 3.3% after the company said it has proposed to pay up to $8.9 billion over 25 years to settle claims connected with cosmetic-talc litigation.
- Western Alliance Bancorp. WAL fell over 15% after the regional bank failed to provide a figure for its deposit balance as of March 31 in its latest financial update.
- C3.ai, Inc. AI fell 14%, extending Tuesday’s losses incurred in reaction to a short report.
- Nvidia Corp. NVDA fell 2.8% after the Chinese Commerce Ministry dialed up its Japanese counterpart regarding the restriction of 23 kinds of semiconductor manufacturing equipment.
- Tesla, Inc. TSLA plummted nearly 5%. A report from UBS indicates that automakers could be headed for overproduction amid normalizing supply chains.
- ConAgra Brands, Inc. CAG rose 2.3% after the company reported better than expected earnings.
- Schnitzer Steel Industries Inc. SCHN fell 7% after reporting weaker-than-expected earnings.
Top Analysts’ Call
- ConocoPhillips COP: Societe Generale upgrades from Sell to Hold
- Meta Platforms, Inc. META: Jefferies maintains Buy and ups price target from $225 to $250
- Zions Bancorp. ZION: Baird upgrades from Neutral to Outperform with a $60 price target
Commodities, Bonds, Forex, And Other Global Equity Markets:
Crude oil marginally eased 0.6%, with a barrel of WTI-grade crude continuing to hold above $80. The United States Oil Fund ETF USO held steady at $70.30 per share.
Treasury yields further dropped, with the yield on the 10-year Treasury Note down 6 basis points to 3.28%, the lowest since early September 2022. The yield on the two-year yield Treasury Note was 11 basis points lower at 3.72%. The iShares 20+ Year Treasury Bond ETF TLT was 1% higher on the day.
The dollar slightly recovered, with the U.S. Dollar index edging up by 0.3%.
European equity indices all closed in the red, with the exception of the UK FTSE 100. The iShares MSCI Eurozone ETF EZU was 0.8% lower.
Gold was marginally up by 0.1% to $2,020/oz, just 3% off its all-time highs. The SPDR Gold Trust GLD was flat at $187.9. Silver slowed 0.3% to $24.93, with the iShares Silver Trust SLV down 0.2% to $22.93 per share. Bitcoin fell 0.8% higher to $27,942.
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This story was updated midday Wednesday by Piero Cingari.
Photo via Shutterstock.
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