A downbeat preliminary reading on the March Consumer Sentiment Index kept the stock market in the red on Friday.
Although nobody was surprised that the talks between John Kerry and Sergei Lavrov failed to accomplish anything, the disappointing preliminary Thompson Reuters/University of Michigan Consumer Sentiment Index ensured that the stock market would finish Friday’s session in the red. Although economists had been expecting to see that the Consumer Sentiment Index would rise to 81.8 from February’s 81.6, the index fell to a four-month low of 79.9.
Reports such as the Consumer Sentiment Index and the Consumer Confidence Index are closely followed as forward-looking indicators of economic health. Consumers need enough confidence to know that their financial situation is stable and that their job is not in jeopardy before they spend money – especially on “big ticket” items. Because the United States economy is 70 percent consumer-driven, any threatened slump in consumer demand raises concern about future stock prices.
The Dow Jones Industrial Average (DIA) lost 43 points to finish Friday’s trading session at 16,065 for a 0.27 percent decline. The Dow ended the week 83 points below its 50-day moving average of 16,148. The S&P 500 (SPY) retreated 0.28 percent to 1,841.
The Nasdaq 100 (QQQ) fell 0.65 percent to finish at 3,627. The Russell 2000 (IWM) managed to advance 0.40 percent to 1,181.
In other major markets, oil (USO) climbed 0.54 percent to close at $35.53.
On London’s ICE Futures Europe Exchange, May futures for Brent crude oil advanced $1.37 (1.28 percent) to $108.29/bbl. (BNO).
April gold futures advanced $11.00 (0.80 percent) to $1,383.40 per ounce (GLD).
The transportation sector had to stop for an oil change during Friday’s trading session, as the Dow Jones Transportation Average dipped 0.07 percent to 7,475 (IYT).
In Japan, the exchange rate for the yen remained the dominant factor in stock market activity. China’s economic slowdown and the crisis in Crimea helped intensify the spirit of risk aversion among investors. Japanese stocks took a hard fall as the yen strengthened to 101.62 per dollar during the last hour of Friday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average sank 3.30 percent to 14,327 (EWJ).
Meanwhile, in the Land of Pretend – Oops! I meant: the Shanghai Stock Exchange – stocks finally began to fade in response to Thursday’s disappointing report from the National Bureau of Statistics, which indicated that February’s industrial production rose 8.6 percent on a year-over-year basis, compared with January’s 9.7 percent annual rate and economists’ estimates of a 9.5 percent increase. The Shanghai Composite Index fell 0.73 percent to 2,004 (FXI). Pay no attention to that nasty head-and-shoulders pattern on the chart! Hong Kong’s Hang Seng Index sank 1.00 percent to 21,539 (EWH).
European investors remained in a risk-averse mood ahead of this weekend’s rigged referendum on Russia’s annexation of Crimea. The Euro STOXX 50 Index finished Friday’s session with a 0.49 percent decline to 3,004 – fading further below its 50-day moving average of 3,089. Its Relative Strength Index is 35.75 (FEZ).
Technical indicators revealed that the S&P 500 remained above its 50-day moving average of 1,828 on Friday, despite retreating 0.28 percent to 1,841. Its Relative Strength Index (RSI) dropped from 50.32 to 48.18. The MACD is sinking further below the signal line, suggesting that the S&P could continue its decline during the immediate future.
On Friday, three sectors advanced, five sectors declined, and the materials sector remained unchanged. The financial sector took the hardest hit, falling 0.64 percent.
Consumer Discretionary (XLY): -0.09%
Technology: (XLK): -0.61%
Industrials (XLI): -0.39%
Materials: (XLB): unchanged
Energy (XLE): +0.09%
Financials: (XLF): -0.64%
Utilities (XLU): +0.47%
Health Care: (XLV): -0.54%
Consumer Staples (XLP): +0.05%
Bottom line: A disappointing preliminary reading of the Thompson Reuters/University of Michigan Consumer Sentiment Index for March guaranteed that the major stock indices would finish Friday’s trading session in the red.
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