Year: 2018

Equities were choppy this week, with indexes gaining roughly 5 percent off their Monday lows, but closing lower on Friday as trade rhetoric escalated. Companies most exposed to potential Chinese retaliation such as Boeing (BA) and Caterpillar (CAT) declined sharply.

Smaller S&P 500 sectors saw marginal losses of less than 1 percent this week. SPDR Energy (XLE) declined 0.09 percent to lead major sectors. Consumer discretionary also fell less than 1 percent. Weakness was concentrated in financials, technology, healthcare and industrials.  SPDR Technology (XLK) fell 2.09 percent.

Economic data was strong this week. March manufacturing PMIs eased slightly from prior month levels, signaling robust expansion. February construction spending increased from a flat January. Auto sales beat expectations handily and increased to an annualized pace of 17.5 million vehicles. Factory orders increased 1.2 percent in February. The March ADP employment report and the services PMIs were all positive.

Weekly jobless claims hit 242,000 last week, but still near four-decade lows. The strengthening U.S. economy caused the trade deficit to expand to $57.6 billion in February. Employers added 103,000 employees in March. February’s new job total was revised significantly higher to 326,000. The unemployment rate held steady at 4.1 percent and average hourly earnings increased 0.3 percent, in line with forecasts.

China fired another shot at major U.S. exports. China buys 70 percent of soybeans sold in international markets and relies on U.S. imports to feed its livestock. The U.S. new tariffs on as much as $100 billion in Chinese imports, in addition to the previously announced $60 billion.

Despite volatile trade rhetoric from China and the United States, the U.S. dollar edged higher on the week. SPDR S&P 500 (SPY) declined 1.31 percent. iShares MSCI EAFE (EFA) slid 0.43 percent. iShares MSCI Emerging Markets (EEM) slid 2.51 percent and WisdomTree Emerging Currency (CEW) declined 0.71 percent. iShares China Large-Cap (FXI) slid 2.75 percent. China is South Korea’s largest trading partner. iShares MSCI South Korea (EWY) decreased 3.02 percent on the week.

Long-term bond yields increased this week on strong economic data and rebounding equities. The 10- and 30-year treasury yields rose to 2.78 and 3.02 percent. Short-term rates also climbed as rate hike expectations stabilized.

Lennar (LEN) crushed earnings forecasts this week and shares rallied more than 10 percent. iShares U.S. Home Construction (ITB) increased 1.85 percent. Monsanto (MON) missed earnings and revenue estimates, but positive guidance lifted shares. VanEck Agribusiness (MOO) slipped 1.97 percent.

Equities advanced on Monday as investors took advantage of discounted stocks. The S&P 500 gained 2.72 percent, while the Dow Jones Industrial average advanced 2.84 percent.  The Russell 2000 gained 3.26 percent.  Technology led Monday’s rally, despite last week’s significant drop and continued volatility in Facebook (FB). SPDR Technology (XLK) gained 3.81 percent and SPDR Financials (XLF) increased 3.24 percent.

This will be a shortened trading week. U.S. markets will close for Good Friday, and markets in Europe, Hong Kong and Australia will be closed on Friday and Monday.

The Conference Board’s March consumer confidence survey is due on Tuesday. Analysts anticipate an increase from February’s 130.8. The University of Michigan survey is forecast to match the prior month reading of 102. The final revision of fourth-quarter GDP should reflect 2.8-percent growth, up from the prior calculation of 2.5 percent. February pending home sales are expected to decline 4.7 percent.

Economists expect weekly jobless claims of 230,000 and a strong rise in personal income of 0.4 percent for February, with consumer spending and core inflation rising 0.2 percent.

The United States reached a deal with South Korea on trade last week and Treasury Secretary Steve Mnuchin is hopeful for a deal with China.

China launched its own oil futures contract on Monday. As the largest importer of oil, China is expected to become the third price setter for global oil prices, alongside the Brent contract in Europe and West Texas Intermediate in the United States. The Shanghai future priced oil at $68 a barrel versus $70 for Brent and $65 for WTI on Monday. Volume in the Shanghai contract exceeded that for the Brent contract in the first day of trading.

Kim Jong-un reportedly made a surprise visit to China on Monday ahead of talks with President Trump, his first ever. Relations have deteriorated in the wake of North Korea’s nuclear testing. The sudden meeting ahead of talks suggests the potential for a major deal. Although China has grown weary of North Korea in recent decades, it still regards the nation as a strategic ally with U.S. forces stationed in South Korea.

The U.S. Dollar Index declined to start the week to its lowest level in a month. The dollar fell against the euro but rallied against the yen. The 10-year Treasury yield moved higher on Monday but remained near its two-month low. The 30-year yield declined.

Walgreens (WAG) will headline a light week for earnings reports. Paychex (PAYX), lululemon (LULU), Factset Research Systems (FDS), Sonic (SONC), Constellation Brands (STZ) and BlackBerry (BB) will also report.