A volatile week began with a delayed response to the prior Friday’s monthly US jobs report, which indicated a growth of only 120,000 jobs.
Stock prices fell sharply Tuesday on renewed concerns about European debt but rebounded strongly Thursday as investors heard two senior US Federal Reserve Board officials make a strong case for maintaining extended low interest rate policies and providing more quantitative easing if necessary.
Amid this environment the DJIA was down -1.6%, the S&P 500 was down -2.0%, the Russell 2000 was down -2.7%, the Global Dow Ex-U.S. was down –1.0% and crude oil fell -0.5%.
China’s first-quarter economic growth eased to 8.1%, its lowest quarterly rate of growth since the first quarter of 2009. The report by China’s National Bureau of Statistics highlighted a shift in the country’s growth engine from investment in infrastructure, real estate and large projects to consumption, which contributed 76% to gross domestic product growth in the first quarter, from 51.6% last year.
The disappointing monthly jobs data from the US Department of Labor released in the first Friday in April –– when markets were closed for Easter –– set a negative tone for last week, as markets responded on Monday.
Also feeding a bearish sentiment were several reports that indicate a possible slowing of the US economic recovery. The NFIB’s (National Federation of Independent Business) index of optimism among small businesses fell to 92.5 in March from 94.3 in February. The Thomson Reuters/University of Michigan’s preliminary consumer sentiment index fell to 75.7 from 76.2 last month.
The US Department of Commerce reported that wholesale inventories rose 0.9% in February. The rate of inflation in the United States eased to 0.3% in March, matching economists’ expectations; core inflation (excluding food and energy costs) rose just 0.2%. Consumer prices rose 2.7% for the 12 months ended in March; core prices rose 2.3%. The overall annual inflation rate of 2.7% is the smallest increase in the past year.
Producer prices climbed 2.8% over the past 12 months, with core prices 2.9% higher. The US trade deficit shrank 12.4% in February, its sharpest decline since May 2009, as imports fell 2.7% while exports remained flat overall. A key contributor was a substantial reduction in US demand for foreign oil after oil prices increased. Imported crude oil volumes fell to their lowest level in 15 years, to 225.7 million barrels, from 270.7 million barrels in January.
China gave more indications of an economic slowdown, posting a trade surplus largely because of weak demand for imports. The $5.35 billion trade surplus in March stands in sharp contrast to the country’s $31.48 billion trade deficit in February. Vehicle sales also slumped in China in the first quarter, falling 3.4% from a year earlier. However, year over- year sales increased 1% in March. China’s consumer price index rose 3.6% in March from a year earlier, up from 3.2% in February and exceeding the expected 3.3% predicted by economists. The March figure indicates rising consumer inflation but is still within the government’s 4.0% annual inflation rate.
Japan reported a surprise 4.8% increase in core machinery orders in February, a rise far greater than expected. Both manufacturing and non-manufacturing orders rose for the first time since last November. However, industrial production fell 1.2% in February. The Bank of Japan upgraded its quarterly economic assessment of two of the country’s nine regions, with the other seven unchanged. This was a major improvement over the previous report in which the BOJ downgraded seven regions.
UK same-store retail sales rose 1.3% in March, while total sales, including sales at new stores, rose 3.6% overall compared with year-earlier figures, according to the British Retail Consortium. The number of permanent job placements increased for the thirdstraight month, according to another report.
Banking giant JPMorgan Chase reported a decrease in profit from a year earlier, but managed to surpass analyst expectations. The bank’s investment banking business reported a decline in first-quarter profit from a year earlier, but its retail services business posted a vast improvement over fourth-quarter and year-earlier results. JPMorgan increased its quarterly dividend and announced a $15 billion stock buyback.
Wells Fargo also surpassed expectations with a record first-quarter net income of $4.25 billion as it strengthened its dominant position in the US mortgage market and purchased assets from European banks.
Alcoa posted a surprise profit for its first quarter, surpassing expectations of a slight loss, as the world’s largest aluminum maker and a corporate bellwether managed the dual challenge of lower aluminum prices and higher energy costs. The company is cutting costs, limiting production, and focusing on high-margin products that can withstand a dip in metal prices, including the aerospace and automotive areas.
Nokia issued its second profit warning in a year, announcing that its first-quarter earnings would be reduced because of intense competition as consumers in emerging markets shift to lower-end smart phones. Nokia reports its first-quarter results Thursday, April 19.
Japanese entertainment and electronics giant Sony announced plans to reduce its work force by 10,000 jobs, or 6% of its global staff. The firm projects a $6.4 billion loss for the business year just ended. This will be Sony’s fourth consecutive annual loss.