S&P 500 registers fist monthly decline in 2019
The Dow Jones Industrial Average (-3.0%), the Nasdaq Composite (-2.4%), and the Russell 2000 (-3.2%) finished with monthly losses of 6.7%, 7.9%, and 7.9%.
No S&P 500 sector finished higher this week, and nine sectors finished with losses between 2.1% (materials) and 4.5% (energy). The negative disposition sent the S&P 500 below its 200-day moving average (2776) to close the week.
Another week came and went with no progress on the U.S.-China trade front. Instead, tensions appeared to escalate following negative developments throughout the week:
The big headline on Friday, which helped accelerate weekly losses was President Trump announcing a 5% tariff rate on all goods imported from Mexico starting on June 10. The tariff rate will increase incrementally during the summer and reach 25% on Oct. 1 unless Mexico takes actions to curb the flow of undocumented migrants entering the U.S.
Investors continued to de-risk from the stock market, and bolster demand for U.S. Treasuries, fearful that these trade tensions will engender slower economic growth and lower earnings prospects. The 8.8% weekly drop in WTI crude ($53.48/bbl, -$5.14) also reflected concerns that slower growth will weaken end demand.
The 2-yr yield dropped 20 basis points to 1.94%, and the 10-yr yield dropped 18 basis points to 2.14%. For the month, the 2-yr yield fell 33 basis points, and the 10-yr yield fell 37 basis points. The U.S. Dollar Index advanced 0.2% to 97.76 this week.
Strikingly, 3-month yield finished 21 basis points higher than the 10-yr yield, widening this difference to its largest since the financial crisis. This term spread, according to research from the Federal Reserve Bank of San Francisco, is the most reliable predictor of a recession among the different term spreads.
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2019-80705 (Exp 09/19)