For tech stocks, the devil was in the details; markets threw a tariff tantrum; consumer spending and inflation were on the low side; the Bank of England tried to stop the Brexodus; China's currency continued strong
Technology sector: Devil in the details The tech stock rout this past week was highly company-specific. For the four days ended Thursday Mar 28, the S&P 500 Index rose
0.65%, but the ten-stock NYSE FANG+ Index fell -4.7%, and the three high-profile stocks, Facebook, Tesla and Amazon fell -4.0%, -14.5% and -4.3% respectively – each for its own distinct reason.
U.S. economic policy: Tariff tantrum The brief outburst of trade threats at the end of last week has rapidly evolved into a series of bilateral negotiations between the U.S. and a select list of trade partners – during which there will likely be ample opportunity for economic, industrial and political influences to be felt before decisions are made.
One high-profile bilateral deal was made in record time: South Korea reached an agreement “in principle” with the U.S. on steel export quotas and imports of U.S. cars. There was added pressure to resolve these issues in advance of meetings between the U.S. and North Korea in the coming months.
U.S. consumer spending and inflation: On the low side February saw consumers remain restrained, with inflation-adjusted personal spending flat vs. January, despite personal income rising 0.4% for the month. February inflation was also restrained, by Dr. Yellen’s favorite measure, falling to 0.2% for the month vs. January’s 0.4% -- and coming in at a slightly higher than expected 1.8% year-over-year. Core inflation, however, was a lower 1.6%. It’s early days in the Powell Administration at the Fed, however, so it’s unclear whether these particular measures will receive the same attention as before.
UK: Bank of England vs. Brexodus Attempting to slow the departure of financial-sector workers and regional headquarters from the City of London, the Bank of England (BoE) announced that its existing regulatory licenses for European-headquartered banks and clearing houses would remain in force until the end of the recently-agreed transitional period. Unfortunately, the European Union isn’t yet on board with this arrangement, so UK-based institutions with European operations might have a harder time of it. A Frankfurt-based lobbying group estimates that as many as 10,000 finance-related jobs will move to Frankfurt from London “in the next few years”.
China: Currency and trade With the focus on trade with China at the heart of much of the tussle over tariffs, it’s noteworthy that the yuan has been on the rise since the beginning of 2017. This week, the currency neared the level right before it fell from about 6.2 per U.S. dollar to 6.4 as the formula for the daily price fixing was adjusted to include a basket of currencies that reduced the weight of the U.S. dollar. The official rate for the currency was set on Thursday, March 29, at 6.3046 yuan per U.S. dollar.
All data source: Bloomberg, as of Friday March 29, 2018, 10:00 – 11:00 AM ET
The NYSE FANG+ Index is an equal-dollar weighted index designed to represent a segment of the technology and consumer discretionary sectors consisting of highly-traded growth stocks of technology and tech-enabled companies such as Facebook, Apple, Amazon, Netflix, and Alphabet's Google.
The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges.
The Standard and Poor's 500 Information Technology Indexis a capitalization-weighted index, based on the standardized GICS Sector group, one of the 11 Sector groups within the S&P 500 Index.