Stock Market Forecast – Stocks Slip Lead Lower by Healthcare

US stocks moved lower on Friday, nearly all sectors were lower but Utilities bucked the trend. US yields moved lower as mixed US data, showed the slowing of global growth is weighing on the United States. While private payrolls came out in line with expectations, a wider than expected trade deficit shows there will be slowing US growth in the Q4.

The worst performing sector was healthcare which dropped by 2.02%, followed by energy which declined by 1.82%. On Wednesday the US Department of Energy reported a larger than expected build in crude oil inventories which generated headwinds for the Energy Sector

Private Payrolls Decellerated

On Wednesday ADP reported that US private payrolls increased by 183K in February which was in line with expectations. The rise reflects a deceleration in the number of private payrolls created. January was revised sharply higher increased to 300K from the 213K initially reported. It is unclear whether the jobs market in the US has peaked. The ISM manufacturing and services report released late last week and early this week showed a decline in hiring. This also leads some economists to reduce their projected GDP for Q1.

The report showed that the number of unemployed in December was 6.3 million and continues to fall short of the number of job openings, which stood at a record 7.3 million as 2018. Private payroll from the ADP/Moody’s report showed the biggest gains coming from professional and business services, with 49,000 new hires, while education and health services added 39,000.

Despite a decline in construction spending for December, the number of hires in this space increased by 25K.  Financial services increased by 21K and manufacturing rose by 17K. Services accounted for 139K and goods-producing brought in 44K new jobs. Mid-sized companies brought in the newest jobs. Companies with less than 500 employees but more than 50 higher 95K new applicants. Large businesses saw an increase of 77K, and small businesses just 12k.

The US Trade Deficit Widened More than Expected

The US trade deficit continues to widen despite effort from the White House to narrow the gap. The December trade deficit increased to a 10-year high of $59.8 billion, well ahead of expectations, according to the Commerce Department. Expectations were for an increase to $57.3 billion, from November’s $50.3 billion.

The increase was drive by a 2.1% increase in imports while exports declined by 1.9%. Slowing global growth is causing a reduction in the demand for US goods, while the strong US economy is driving the demand for imported goods. For the year, the deficit increased by $68.8 billion, or 12.5%, to $621 billion. It was the largest trade gap since 2008. The goods deficit came to $891.3 billion for the year, the highest on record. The trade deficit with China in December was $38.7 billion. Separately, the Beige book showed moderate growth in January and February. Of the 12-Federal Reserve’s districts, ten saw “slight-to-moderate” growth in late January and February.