U.S. markets suffered steep losses on Friday to erase weekly gains following another round of tough tariff talk ahead of the open. President Trump is considering whether to add tariffs on another $100 billion worth of Chinese goods as punishment for China’s reciprocal tariffs on $50 billion of U.S. goods.

The market weakened further following a speech from Fed chair Jerome Powell, who said the U.S. budget was on an unsustainable course and the Fed should stay on a patient path of rate hikes.

The Nasdaq tumbled 2.3% after trading to an intraday low of 7,877 while closing back below the 7,000 level for the fifth time in 10 sessions. The Russell 2000 stumbled 1.9% following the backtest to 1,502 while holding crucial support at the 1,500 level.

For the week, the Nasdaq was lower by 2.1% while the Russell 2000 was off 1.1% with both indexes currently below their 100-day moving averages.

The Dow tanked 2.3% after testing a low of 23,738 while closing back below the 24,000 level for the first time in four sessions. The S&P 500 sank 2.1% after tapping a low of 2,586 but closed above the 2,600 level for the eighth time in nine sessions.

The Dow was down 0.7% for the week while the S&P 500 fell 1.4%. Both indexes remain below their 100-day moving averages with the 50-day moving averages on track to breach these levels.

This would form a mini-death cross and is typically a bearish signal.

Industrials and Technology led sector weakness after sinking 2.8% and 2.5%, respectively. Materials, Health Care and Financials were down 2.4%. There were no sectors that finished in the green.

For the week, Technology and Industrials fell 2.1% while Health Care was lower by 1.9%. There was no sector strength for the week.

Global Economy – European markets showed little reaction to President Trump’s new $100 billion tariff threat but were slightly lower on weak economic data. Germany’s DAX 30 the Belgium20 fell 0.5% while the Stoxx 600 Europe and France’s CAC 40 gave back 0.4%. UK’s FTSE 100 dipped 0.2%.

German February industrial production declined 1.6% month-over-month.

March Markit Eurozone retail PMI declined 2.2 to 50.1.

Asian markets were mostly lower with Chinese markets closed again on Friday for a national holiday. Hong Kong’s Hang Seng index jumped 1.1% while Japan’s Nikkei index fell 0.4%. South Korea’s Kospi gave back 0.3% and Australia’s S&P/ASX 200 slipped a tenth-point, or 0.0%.

Non-farm payrolls increased 103,000 in March, with earnings up 0.3% and the unemployment rate holding at 4.1%.

The payrolls report had been expected to show 185,000 jobs gained in March, alongside a dip in headline unemployment to 4% and a 0.3% rise in average hourly earnings compared to the prior month.

Baker-Hughes Rig Count reported the U.S rig count was up 10 to 1,003 rigs, with oil rigs up 11 to 808, gas rigs unchanged at 194, and miscellaneous rigs down 1 to 1.

Consumer Credit rose $10.6 billion in February after a $15.6 billion gain in January, and below expectations of $15.1 billion.

Market Sentiment – Fed chairman, Jerome Powell reiterated the Fed’s gradual path on rate increases are the best way to promote the Fed’s goals.

He supports a patient approach to policy and said risks to the economy are generally balanced, but the Fed must balance between hiking too quickly or too slowly.

He said a few measures, including moderate wage gains, show the labor market is not excessively tight and is expected to remain strong.

The Fed chairman also said the U.S budget is not on a sustainable path but added it’s a longer run problem and it’s not really an issue for the conduct of monetary policy or financial supervision.

He said the budget deficit affects growth expectations only at the margin and that over time the budget deficit is important for potential growth.

Powell went on to say tariff discussions are at a relatively early stage and it’s too early to say what the talks mean for the outlook. He said tariffs can push up prices, but it’s too early to say whether that happens or not.

On wages and inflation, Powell commented that it’s hard to find a connection between immigration and wage inflation. He also said the U.S. financial system is incomparably stronger and he feels good about the strength of the financial sector, adding, the time has come to look for more efficient financial regulations.

The iShares 20+ Year Treasury Bond ETF (TLT) snapped a three-session slide after trading to a high of $121.15. Fresh support is at $121.50-$122 and the 100-day moving average with a close below the latter being a slightly bullish development.

Support is at $120.50-$120.

RSI is back in an uptrend with resistance at 60. Support at 50 held on prior weakness with a close below the level being a bearish signal.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) traded down to $237.24 with shaky support at $237-$236.50 holding.

A close below $235 would be a very bearish development with continued risk to $233-$232.50 and the 200-day moving average. Lowered resistance is at $239.50-$240.

RSI is back in a downtrend after failing resistance at 50. Support is at 40 with a close below the latter confirming additional weakness towards 30 and February/ March lows.

The Consumer Staples Select Spiders (XLP) bottomed at $52.16 with near-term support at $52.25-$52 holding. A close below the latter would signal additional weakness towards $51.50-$51 and prior March lows. Resistance remains at $52.75-$53.

The technical outlook remains weak with the 50-day moving average falling below the 200-day moving average to form a death cross. RSI is struggling to clear resistance at 50. Support at 40 with a close below this level leading to a retest of 35-30 and February lows.

The percentage of S&P 500 stocks trading above the 50-day moving closed Friday at 24.4% down from an opening of 34.92%. Support is at the 20%-15% level with risk to 10% and February lows on continued weakness.

Near-term resistance is at 30%-35%.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average is currently at 52.42% with Friday’s low reaching 50.48%. Early April support reached a low of 49% with a close below this level leading to a possible retest of 40% and early July 2016 levels.

Lowered resistance is at 55%-60%.

All the best,
Roger Scott