Stocks at 3-Month Lows Awaiting PCE, Job Openings

Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with

a recap of recent news and a look at what's ahead.

I'm Kaledo Claire and here is Schwab's early-looking 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 or PCE price index at 8.30 a.m. Eastern time

and the January job openings and labor turnover surveyer Jolts soon after the open provided

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 on Wall Street.

Almost none of this week's data capture readings taken after the war, meaning much

could be discounted.

An exception is today's March preliminary consumer sentiment data from the University

of Michigan through attending a Eastern time.

Sentiment has been weak for months.

The war in 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 remained front and center after global prices

hit nearly $100 per barrel Thursday.

This came as Iran's supreme leader vowed to keep the straight of hormones blocked and

several oil tankers were attacked in Iraq.

Hundreds 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, in all this 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 Capy Jones' chief-fixed income

strategist at the Schwab Center for Financial Research for Skiffer.

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 termed two-year-in-five-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 researching

strategy at Schiffer.

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 VCE could show monthly 0.3% headline growth and 0.4% for

core compared with 0.4% for both in December, according to Breaking.com consensus, core excludes

volatile energy and food costs.

Jolts will likely be closely watched after jobs broke 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 of more than 7%.

Starts beat the briefing.com consensus figure, but permits a measure more aligned with future

demand missed the average estimate.

The weekly jobless claims stayed near record lows at 213,000, possible evidence that layoffs

remain light, despite AI and war fears.

Continuing jobless claims fell to 21,000 from the prior week with the potential sign of

hiring or of people giving up their job searches.

The US dollar continued its resilience despite higher oil and weaker US equities.

It traded at 99.70 late in Thursday's session while highest level of the year and the

strongest price since late November, at last topped 100 on November 25.

The US, 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 US dollar rise so much over the past week,

at Kevin Gordon, at a macro-research and strategy at Skiffer.

In any event of geopolitical instability, investors tend to flock to the dollar and

they view it as this perceived havin' currency, and that's even truer today.

Adobe shares lost 5% initially in post-market trading, despite the software giant reporting

better than expected quarter-layernings and revenue, and issued guidance that topped

Wall Street's consensus.

The company also reported that at CEO of 18 years plans to transition from whose position

once his 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,

because speech by CEO Jensen Huang, scheduled for 2 p.m. Eastern time that day.

On Thursday, major indexes fell sharply and many closed nearer their lows.

That's a weak signal technically, and so is the S&P 500's drop the low 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% near to date.

Yesterday's close was the weakest for the S&P 500 since November 21st, 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.

8 of 11 S&P 500 sectors fell yesterday with only energy and the defensive utilities

and staple sectors up.

Industrials finished last, right behind financials and consumer discretionary, as economic

growth worries intensified, and Golden Sachs cut its expected U.S. gross domestic product

or 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,

turned around $169 million, or less than half of investors' tendered 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 automakers

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.

Barons reported.

Dow Jones industrial average cratered 739.42 points Thursday, or 1.56% to 46,677.85.

The S&P 500 index plunged 103.18 points for 1.52% to 6,672.62, and the NASDAQ composite

8.404.15 points for 1.78%, the 22,311.98.

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