U.S. markets were slammed with heavy losses on Thursday following President Donald Trump’s plans to propose trade duties on China imports.

Worry over a $50 billion tariff on China high-tech exports along with other penalties to protect intellectual capital caused volatility to spike near its highest levels for the month.

The Dow dropped 2.9% after trading to a low of 23,938 and closing back below the 24,000 level for the first time since February 8th.

The index is down 9.99% from its all-time high. The S&P 500 sank 2.5% following the backtest to 2,641 while giving up its gains for 2018.

The Nasdaq was punished for 2.4% after trading to a low of 7,164 to close back below its 50-day moving average. The Russell 2000 tanked 2.2% after testing a low of 1,562 to close back below its 50-day moving average, as well.

Utilities gained 0.4% and were the only sector that closed in the green. Financials sank 3.7% while Industrials tanked 3.3% to lead sector laggards.

Materials and Health Care sank 3% and 2.9%, respectively.

Global Economy – European markets posted steep losses following weaker-than expected economic news. Germany’s DAX 30 and the Belgium20 gave back 1.7%.

The Stoxx Europe sank 1.6% and France’s CAC 40 was down 1.4%. UK’s FTSE 100 fell 1.2%.

The Eurozone March Markit composite PMI fell 1.8 to 55.4, weaker than expectations for a dip of 0.3 to 56.8 and the slowest pace of expansion in 14 months.

The Eurozone March Markit manufacturing PMI sank 2 to 56.6, below forecasts for a slip of 0.5 to 58.1.

The German March Markit/BME manufacturing PMI dropped 2.2 to 58.4, weaker than expectations of -0.8 to 59.8 and the slowest pace of expansion in 8 months.

The German March IFO business climate declined 0.7 to an 11-month low of 114.7, stronger than forecasts for a fall of 0.8 to 114.6.

Asian markets settled mixed with Japan’s Nikkei rising 1% and South Korea’s Kospi adding 0.4%.

Hong Kong’s Hang Seng fell 1.1% and China’s Shanghai was down 0.5%. Australia’s S&P/ASX 200 slipped 0.2%.

The Japan March Nikkei manufacturing PMI fell 0.9 to 53.2, the slowest pace of expansion in 5 months.

Initial U.S. jobless claims rose by 3,000 to 229,000 in the week ended March 17th. The monthly average of claims increased by 2,250 to 223,750. Continuing unemployment claims fell by 57,000 to 1.83 million.

Leading Indicators rose 0.6% in February, following a 0.8% gain in January and a 0.7% rise in December.

FHFA House Price Index rose 0.8% to 259.3 in January, ahead of expectations for a rise of 0.3%, and the largest increase since August.

Bloomberg Consumer Comfort Index rose to a 56.8, which is just below the 57 cycle-high from early-February.

PMI Composite Flash rose 0.4 points to 55.7 in the preliminary print, the highest reading since March 2015.

Kansas Fed Manufacturing Index for March came in at 17.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) surged to an intraday high of $120.82 while clearing an holding the $120 level along with its 50-day moving average.

Fresh resistance is at $120.50-$121. Rising support is at $119.75-$119.25 with a close below $119 signaling a short-term top.

Market Analysis – The PowerShares QQQ (QQQ) fell for the sixth-time in seven session after tapping an intraday low of $162.80 while closing back below its 50-day moving average.

Fresh support from mid-February at $162.50-$162 is back in play with a move below the latter being a continued bearish development. Lowered resistance is at $163.50-$164

RSI remains in a downtrend after falling below 40 with early February support at 30.

The Spider S&P Retail ETF (XRT) declined for the seventh-time in nine sessions after closing on its session low of $43.37.

Support at $43.25-$43 held with a close below the latter getting $42.50-$42.25 and early February lows back in play. Resistance is at $43.75-$44.

RSI remains on track to test early February support at 30 following the close below 40.

All the best,
Roger Scott