Troubling Economic Data Leads To Sell-Off On Wall Street

Extending the pullback seen over the two previous sessions, stocks moved sharply lower during trading on Friday. The major averages came under pressure early in the session and saw further downside as the day progressed.

The tech-heavy Nasdaq posted a particularly steep loss, plunging 481.04 points or 2.7 percent to a six-month closing low of 17,322.99. The S&P 500 also tumbled 112.37 points or 2.0 percent to 5,580.94, while the Dow slumped 715.80 points or 1.7 percent to 41,583.90.

The recent pullback more than offset a strong start to the week. The Nasdaq plummeted by 2.6 percent for the week, while the S&P 500 lost 1.5 percent and the Dow shed 1.0 percent.

The sell-off on Wall Street came amid concerns about the outlook for the economy following the latest data, including the Federal Reserve’s preferred readings on inflation.

While a Commerce Department report showed consumer prices increased in line with economist estimates, core consumer prices rose by slightly more than expected.

The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.3 percent in February, matching the increases seen in the two previous months as well as economist estimates.

The annual rate of growth by the PCE price index was 2.5 percent in February, unchanged from January and in line with expectations.

Meanwhile, the report said the core PCE price index, which excludes food and energy prices, climbed by 0.4 percent in February after rising by 0.3 percent in January. Economists had expected another 0.3 percent increase.

The annual rate of growth by the core PCE price index also accelerated to 2.8 percent in February from an upwardly revised 2.7 percent in January.

Economists had expected the year-over-year growth by the core PCE price index to tick up to 2.7 percent from the 2.6 percent originally reported for the previous month.

The report also showed real personal spending, which excludes price changes, inched up by just 0.1 percent in February after sliding by 0.6 percent in January.

“The acceleration in core PCE inflation and the softness in consumer spending is an unfavorable mix of economic data,” said Nationwide Chief Economist Kathy Bostjancic.

She added, “The data support our view that downside risks to the economy are emerging, but with inflation heating up, the Fed for now will maintain its wait-and-see approach.”

Stocks saw further downside after the University of Michigan released revised data showing consumer sentiment deteriorated by more than previously estimated in March.

The report also showed year-ahead and long-run inflation expectations surged by more than previously estimated during the month.

Sector News

Computer hardware stocks showed a substantial move to the downside on the day, with the NYSE Arca Computer Hardware Index plunging by 3.1 percent to its lowest closing level in over four months.

Significant weakness was also visible among airline stocks, resulting in a 3.0 percent nosedive by the NYSE Arca Airline Index. The index plummeted to a six-month closing low.

Semiconductor stocks also saw considerable weakness, as reflected by the 3.0 percent plunge by the Philadelphia Semiconductor Index, which hit its lowest closing level in over a year.

Software, steel, retail and housing stocks also showed notable moves to the downside, while utilities stocks were among the few groups to buck the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index tumbled by 1.8 percent, while China’s Shanghai Composite Index slid by 0.7 percent.

The major European markets also moved to the downside on the day. While the U.K.’s FTSE 100 Index edged down by 0.1 percent, the French CAC 40 Index declined by 0.9 and the German DAX Index slumped by 1.0 percent.

In the bond market, treasuries moved sharply higher in reaction to the latest U.S. economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 4.255 basis points to 4.255 percent.

Looking Ahead

The closely watched monthly jobs report is likely to be in the spotlight next week, while reports on manufacturing and service sector activity may also attract attention.