Investors experienced another turbulent week and seem to be bracing for more volatility with the VIX index rising 72% since the beginning of the year. U.S. equities finished the period down and the U.S. 10-year yield finished up at approximately 2.8%.
Trade took center stage during the week after the Office of the U.S. Trade Representative unveiled a list of proposed tariffs on roughly $50B of Chinese goods.
China responded with $50B of U.S. tariffs on items including soybeans, automobiles, chemicals and aircraft. However, neither side said it will implement tariffs right away, with officials from both countries reiterating room for negotiations. White House officials, including Wilbur Ross and Larry Kudlow, downplayed the economic impact of the tariffs.
Stocks briefly bounced back mid-week after comments from both U.S. and Chinese officials on a preference for negotiations, while the broader market remained suspect that a full trade war will develop. However, there were other reports that White House officials remain divided on how far to go to punish China and over what type of concessions the U.S. should accept – adding to the uncertainties market participants are presently navigating.
The ISM Manufacturing Index for March of 59.3 missed consensus estimates of 60.0, and trailed February’s 60.8 print. Prices paid jumped to 78.1 from February’s 74.2, showing higher raw material prices for the 25th straight month. New orders and the employment index each fell more than 2 points from last month; the production index and supplier deliveries also were lower. The backlog of orders hit its highest level since May 2004, as respondents described labor and skill shortages as impediments to production output.
The final March reading of the Markit U.S. Manufacturing PMI of 55.6 was slightly below 55.7 consensus, but ahead of February’s 55.3 and the highest level since March 2015. Construction spending for February rose 0.1%, missing estimates of 0.4%; the Commerce Department revised its January reading down 0.1% to a contraction of less than 0.1%.