Stocks Climb Driven Higher by Technology, Energy Shares Buck the Trend

Soft jobs data failed to derail Wednesday’s rally
David Becker

US stocks were higher on Wednesday buoyed on the open from better than expected Chinese PMI data, and hopes that China and the US would soon agree on a trade deal. Stocks closed well off the highs of the day, with the Nasdaq leading the three major indices higher notching up a gain of 0.6%.  The Dow was the worse performer climbing 0.15%. Sectors were mixed, with technology shares leading the markets higher. The energy sector was the worst performer as crude oil prices dropped following the Department of Energy’s inventory report. ISM services showed expansion but at a lower rate than expected. Private jobs data in the US also slipped.

Services Slump More than Expected

The ISM reported on Wednesday that its US non-manufacturing index fell to 56.1 in March, which was the weakest reading since August 2017, down from 59.7 in February. Expectations were for the index to dip to 58. New orders showed weakness dropping 6.2 points to 59. Prices paid increased with is not good since by 4.3 points to 58.7.

Jobs Data Slides

ADP reported that private payrolls increased by just 129,000 for the month, well below expectations that payrolls would increase by 180,000. The weakness was offset somewhat by an upward revision for February, which increased to 197,000 from an initially reported 183,000. March was the worst month since September 2017, which saw an increase of just 111,000. Its clear that the jobs numbers are on the decline. Most of the gains came from services, which increased 135,000, while goods-producing industries lost 6,000 positions. Construction declined by 6,000 while manufacturing dipped by 2,000. On the plus side, education and health services saw an increase of 56,000 while professional and business services added 41,000.

Chinese Data Buoyed Global Stocks

Asian shares helped US futures point to a higher open following a confirmation that Chinese manufacturing is on the rise. The Caixin’s composite PMI rose to 52.9 from 50.7 in February.  It is the strongest since last June.  The Shaghai rallied on the news finishing the session up 1.25%.

Crude Oil Prices Eased Following Inventory Data

Crude oil prices eased after hitting a fresh 5-month high, following Wednesday’s inventory report released by the US Department of Energy.  Crude oil inventories increased by 7.2 million barrels from the previous week. Expectations had been for a small decline. Gasoline inventories decreased by 1.8 million barrels last week and are about 2% above the five year average for this time of year. Distillate fuel inventories decreased by 2.0 million barrels last week and are about 6% below the five year average for this time of year.

Demand remains strong. The EIA reported that total product demand during the past month averaged 20.6 million barrels per day. Gasoline demand was down 1.5% year over year while distillate fuel demand jumped to 4.3 million barrels a day up 6.4% year overyear. Jet fuel demand is also strong rising 3.7% year over year.

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