Investors wait for key labor market data due Friday
U.S. stocks finished on a flat note on Thursday, 31 March 2016. The stock market ended with little losses ahead of tomorrow's release of the March Employment Situation Report. Other contributing factors for today's decline included weakness from the oil pit and the underperformance of the heavyweight financial sector.
The equity market began its day on a flat note as cautious trading overseas and indecision from the oil pit took center stage at the open. International bourses adopted a risk-off posture as they set their sights on tomorrow's influential Employment Situation Report for March. However, a rebound in crude oil and some early sector leadership from the heavily-weighted health care, technology and financials would lift the indices to their best levels of the day.
For March 2016, it was one of the best-performing months since last October with a whimper, as the main benchmarks closed marginally lower on Thursday.
The Dow Jones Industrial Average closed down 31.57 points, or 0.2% at 17,685.09. The blue-chip index gained 7.1% over the month and is up 1.5% since the start of the year. On Thursday, the S&P 500 fell 4.21 points, or 0.2% to 2,059.74. The S&P 500 advanced sharply in March, after seeing three straight months of declines. The 6.7% gain over the month was the biggest since last October. Over the quarter, however, the index was us up a modest 0.8%, but bounced back from the sharp selloff that dominated the beginning of the new year. The Nasdaq Composite finished flat on Thursday at 4,869.85 and booked a 6.8% return over the month, but was still down 2.8% for the quarter overall.
Market reaction to a pair of mixed economic reports was muted as investors were cautious on the last day of the quarter as they waited for key labor market data due Friday.
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The pullback on Thursday follows Wednesday's positive close for U.S. equities after dovish comments by Federal Reserve Chairwoman Janet Yellen, who signaled the central bank won't raise interest rates in April. Over the past month, there has been a fall in expectations for the Fed to raise interest rates again soon, which has helped boost U.S. stock markets and weaken the dollar.
Just this week, Fed Chairwoman Janet Yellen re-emphasized the likelihood for only a modest upward adjustment to U.S. interest rates this year, a reaction that remains dependent on signs of sustainable rising inflation. Yellen's comments sent the dollar lower. Nonyielding gold tends to move opposite of the dollar.
Economic data will offer clues on the Fed's next move. Thursday data showed that U.S. weekly jobless claims rose to the highest level in two months, while Chicago's business barometer for March edged higher. The much-anticipated monthly jobs report is due out Friday.
Initial claims for the week ending 26 March rose by 11,000 to 276,000 (consensus 265,000). Despite the headline increase, the series remains inside a 250,000-300,000 range that has been in effect since July 2014. Including today's release, initial claims have now been below the 300,000 mark for 56 consecutive weeks. There were no special factors influencing the report and the four-week moving average moved up by 3,000 to 263,250. Continuing claims for the week ending 19 March were 2.173 million, down 7,000 from the upwardly revised prior week level of 2.180 million (from 2.179 million). The four-week moving average for the series fell 14,500 to 2.191 million.
Separately, the Chicago Purchasing Managers Index registered a 53.6 reading for March, which was above the consensus estimate of 49.9 and well above the prior month reading of 47.6. Today's reading lifted the index above 50, which is the demarcation line between contraction and expansion in activities. The March improvement was driven by snapbacks in Production and Employment components of the report. The Production Index spiked to 53.7 from 44.0 while Employment surged to 52.8 from 45.2, reaching its highest level since April 2015. Furthermore, New Orders (to 55.6 from 51.7) and Order Backlogs (to 49.7 from 45.3) also improved, underpinning the headline increase. Despite the improvements, Backlogs remained below 50 to continue a stretch that dates back to January 2015.
Among major stocks under focus, shares of IBM rose 2% after IBM reached a deal to buy Bluewolf Group LLC for an undisclosed sum. Shares in Monsanto fell 3.7% after analysts at Bernstein cut their price target for the stock to $80 calling its reduce earnings forecasts too optimistic.
Major European markets closed lower across the board.
Bullion prices ended higher on Thursday, 31 March 2016 at Comex. Gold futures settled higher on Thursday, scoring their best quarterly performance. Bullion has benefited as the Federal Reserve's dovish stance on policy has softened the highflying U.S. dollar.
June gold gained $7, or 0.6%, to settle at $1,235.60, after a 0.7% drop on Wednesday. Prices for the most-active contracts saw a monthly gain of less than 0.1% the smallest of the year, but gold jumped 16.4% in the first three months of 2016, its strongest quarterly showing since the third quarter of 1986. In other metals trading, May silver gained 25.3 cents, or 1.7%, to $15.464 an ounce, with prices up about 12% for the quarter.
Crude oil futures edged higher on Thursday, 31 March 2016 with prices ending the month of March nearly 14% highertheir best monthly performance in almost a year. Oil prices managed to barely break a five-session losing streak on Wednesday, on the back of a fall in weekly U.S. crude production.
West Texas Intermediate crude oil for May tacked on 2 cents to settle at $38.34 a barrel on the New York Mercantile Exchange. Prices, based on the most-active contracts, were about 13.5% higher for the month. That was the largest monthly climb since April 2015. Prices were up about 3.5% for the first quarter of the year.
The Treasury complex inched towards session highs throughout the afternoon with the yield on the 10-yr note ending its day lower by five basis point at 1.77%.
Today's participation was above the recent average as more than 974 million shares changed hands on the NYSE floor.
Tomorrow's economic data will include the 8:30 ET release of the Employment Situation Report for March (onsensus 200k). Separately, the ISM Index for March (consensus 50.6), Construction Spending for February (consensus 0.2%), and the final reading of Michigan Consumer Sentiment (consensus 90.5) will each cross the wires at 10:00 ET.
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