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Stocks Return to Negative Territory for the Week
31-May-18 16:15 ET
Dow -251.94 at 24415.84, Nasdaq -20.34 at 7442.11, S&P -18.74 at 2705.27

https://www.briefing.com/investor/markets/stock-market-update/2018/5/31/stocks-return-to-negative-territory-for-the-week.htm

[BRIEFING.COM] The U.S. equity market returned to negative territory for the week on Thursday, giving back a good chunk of Wednesday's rebound effort, as investors digested the latest tariff-related headlines and looked ahead to Friday's release of the Employment Situation report for May. The major averages finished near the bottom of their daily ranges, with the S&P 500 and the Dow Jones Industrial Average dropping 0.7% and 1.0%, respectively. The tech-heavy Nasdaq Composite showed relative strength, shedding just 0.3%, as tech names outperformed.

President Trump's administration announced on Thursday that it will let steel and aluminum tariff exemptions expire for the EU, Canada, and Mexico, effectively slapping a duty of 25% on steel imports and a duty of 10% on imports of aluminum coming from the three U.S. trading partners. The tariffs, which elicited retaliatory threats, will go into effect June 1st.

Meanwhile, Secretary of State Mike Pompeo said the U.S. and North Korea are making progress towards a June 12 summit, and The New York Times reported that a delegation of North Korean officials will be hand-delivering a letter to President Trump from North Korean leader Kim Jong Un. In Europe, Italy's Five-Star Movement and League parties have reportedly reached a deal to form a coalition government, and German financial giant Deutsche Bank tumbled to a 16-month low after The Wall Street Journal reported that it's on the Federal Reserve's list of troubled banks.

On Wall Street, nine of eleven S&P 500 sectors settled Thursday in negative territory, with the utilities sector (+0.1%) and the top-weighted technology sector (unch) being the two exceptions. The tech group, which represents around a quarter of the broader market by itself, was helped by positive performances from giants Facebook (FB 191.78, +4.11) and Alphabet (GOOG 1084.99, +17.19), which advanced 2.2% and 1.6%, respectively. Chipmaker Micron (MU 57.59, -4.98) didn't do so hot though, tumbling 8.0%, after being downgraded to 'Equal-Weight' from 'Overweight' at Morgan Stanley.

The industrials, consumer staples, and telecom services sectors finished at the back of the pack with losses between 1.3% and 1.6%, but most groups didn't lose more than 1.0%. The consumer discretionary sector (-0.5%) finished in line with the S&P 500, but there were several big movers within the group. For instance, Dollar Tree (DLTR 82.59, -13.76) and Dollar General (DG 87.48, -9.04) dropped 14.3% and 9.4%, respectively, after missing Q1 earnings estimates, and General Motors (GM 42.70, +4.87) rallied 12.9% after announcing that Softbank will be investing $2.25 billion in GM's self-driving unit.

Outside of the equity market, U.S. Treasuries finished Thursday slightly higher, sending yields lower across the curve. The yield on the benchmark 10-yr Treasury note slipped two basis points to 2.82%. Meanwhile, the U.S. Dollar Index declined 0.1% to 93.97, and WTI crude futures dropped for the seventh time in eight sessions, tumbling 1.7% to $67.04 per barrel.

Reviewing Thursday's batch of economic data, which included Personal Income, Personal Spending, and the PCE Price Index for April, the weekly Initial Claims report, the Chicago PMI for May, and Pending Home Sales for April:

Personal income climbed 0.3% in April (Briefing.com consensus +0.3%) following a revised increase of 0.2% in March (from 0.3%). Meanwhile, personal spending rose 0.6% in April (Briefing.com consensus +0.3%) following a revised increase of 0.5% in March (from 0.4%). The PCE Price Index rose 0.2% in April (Briefing.com consensus +0.2%), and the core PCE Price Index, which excludes food and energy, increased 0.2% (Briefing.com consensus +0.1%). Year-over-year, the core PCE Price Index is up 1.8%, unchanged from the last reading (which was revised down from +1.9%).
The key takeaway from the report is that real PCE was up 0.4%, leaving it well above the first quarter average growth rate of less than 0.1% and solidifying expectations for stronger GDP growth in the second quarter. Separately, the firming trend in the price indexes should contribute to an internal belief at the Federal Reserve that there is scope for three rate hikes in 2018.
The latest weekly initial jobless claims count totaled 221,000, while the Briefing.com consensus expected a reading of 227,000. Today's tally was below the unrevised prior week count of 234,000. As for continuing claims, they declined to 1.726 million from a revised count of 1.742 million (from 1.741 million).
The latest initial claims report is encouraging, yet it will be glossed over by market participants, who will turn a more attentive eye to Friday's release of the Employment Situation Report for May.
The Chicago PMI for May hit 62.7 (Briefing.com consensus 57.9), up from 57.6 in April.
The key takeaway from the report is that all five barometer components increased in May, reflecting renewed growth momentum in manufacturing activity in the Chicago Fed region.
Pending Home Sales decreased 1.3% in April (Briefing.com consensus +0.7%). Today's reading follows a revised 0.6% increase in March (from +0.4%).

On Friday, investors will receive the Employment Situation report for May at 8:30 AM ET. The Briefing.com consensus expects that the report will show the addition of 190,000 nonfarm payrolls, a 0.3% increase in average hourly earnings, and an unemployment rate of 3.9% (unchanged from April). In addition, the ISM Index for May (Briefing.com consensus 58.0) and the Construction Spending report for April (Briefing.com consensus +1.0%) will cross the wires at 10:00 AM ET, and May auto and truck sales will be released throughout the day.

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