The broad market S&P 500 index notched its fifth straight weekly decline, dropping 2.1%. The tech-heavy Nasdaq slid 3.2% last week, while the blue-chip Dow retreated 0.9%.
The Nasdaq fell into a correction, now almost 13% below its record set in October. The Dow tumbled into correction territory Friday on an intraday basis and ended the session down 10% from its closing high. The S&P 500 is down 8.7% from its closing record.
International Brent crude futures rose 4.22% last Friday to settle at $112.57 per barrel. U.S. West Texas Intermediate futures settled the week at $99.64 a barrel. It was the highest close since July 2022 for both benchmarks.
The volatility in the markets was driven by ongoing uncertainty around the Iran war. Late in the week, stocks fell as President Donald Trump pushed back his deadline for a deal with Iran until April 6, provoking further market concerns about the duration of the conflict.
S&P Global’s manufacturing and services Purchasing Managers Indexes (PMIs) for March overall indicated slowing growth and rising inflation, and while both manufacturing and services PMI remained in expansionary territory, markets saw the reports as adding to stagflation concerns.
Final figures of fourth-quarter productivity and unit labor costs saw significant revisions, with productivity lower and unit labor costs higher than originally reported.
Looking ahead to this week, investors will be watching any development related to the Iran war. The labor market will be another focus, with the March jobs report due, along with Job Openings and Labor Turnover Survey (JOLTS) data, the ADP Employment Report, and Challenger job cuts.
Other key updates expected will include retail sales, consumer confidence from the Conference Board, and manufacturing PMI from the Institute for Supply Management (ISM).
Please note, we will not be publishing this report next week due to the holiday.
If you click on the Looking Ahead link below, you will find a report written by Wells Fargo Investment Institute. Below are excerpts from that research.
Week review: March 23-27
Economic data
- S&P Global’s manufacturing and services PMIs for March evidenced the impact of the Iran war, with the data signaling slower growth coupled with a spike in prices and demand pulled forward due to supply concerns.
- Though all components remained in expansionary territory, the composite and services measures slowed month-over-month to their lowest levels in 11 months at 51.4 and 51.1, respectively.
- The manufacturing print increased to 52.4 as new orders and input inventories increased, signaling improved factory business conditions.
- Employment across both manufacturing and services dragged on overall prints. Given the uncertain economic backdrop, firms saw a decline in employment as well as greater reluctance to hire.
- The Iran war led to supply delays, increased purchasing by factories, and higher energy prices, all of which pushed prices upward. Input costs continued their uptrend, and the largest increase in selling prices since August 2022 indicated an uptick in passthrough to consumers.
- Construction spending for January declined M/M by 0.3%, surprising to the downside.
- Final prints of fourth-quarter unit labor costs and productivity both saw unexpected revisions, with productivity decreasing while unit labor costs increased.
- Labor productivity was revised downward, a full percentage point, from 2.8% to 1.8% quarter-over-quarter, as output decreased while hours worked remained unchanged.
- Unit labor costs were revised upward to a 4.4% annualized pace, from the prior print of 2.8%, driven by a combination of lower productivity and higher compensation.
- Initial jobless claims for the week ended March 21 remained relatively steady at low levels by historical standards, while continuing claims for the week ended March 14 declined to their lowest level in nearly 2 years. The report suggested that despite economic concerns, the labor market has remained stable.
Looking Ahead to next week: March 30 to April 3
U.S.
- The highlight will be Wednesday’s March manufacturing PMI from the Institute for Supply Management, followed by the jobs report on Friday. Other reports include March’s ADP survey of private employment, and Challenger job cuts report, along with February‘s retail sales, trade balance, and the JOLTS report.
- Also on tap: March’s consumer confidence, vehicle sales, Market News International Chicago PMI, and measures of economic activity from the Federal Reserve Bank of Dallas.
- Rounding out the docket are January’s business inventories and dual measures of home prices.
Asia
- In China, the focus will be on private and official government releases of March PMIs for both the manufacturing and service sectors.
- From Japan, look for first-quarter business activity updates from Tankan; February’s jobless rate, retail sales, housing starts, and preliminary industrial production; and March’s Tonkyo Consumer Price Index (CPI), monetary base, and finalized PMIs.
- Elsewhere, South Korea’s February industrial production and March CPI, trade balance, and manufacturing PMI hit the tape, along with Australia’s trade, balance, private sector credit, and building approvals.
Europe
- In Europe, the highlight will be March CPI readings and finalized manufacturing PMI, along with the Euroszone’s February unemployment rate.
- From France, watch for February’s industrial production, Producer Price Index, consumer spending, and budget balance, while Germany releases their February retail sales and March unemployment claims.
- Also be on the lookout for the U.K.’s finalized fourth-quarter Gross Domestic Product, in addition to March’s house prices and February’s mortgage approvals and consumer credit.
