Outside Markets
Equities: The S&P 500 fell into correction territory Thursday as growing economic uncertainty continued to batter the stock market. The continuing upheaval over tariffs and the chances of increased unemployment and inflation sent the S&P 500 nearly 80 points lower to 5,520 and down more than 4% for the month. Nasdaq, which was already in a correction, dropped another 345 points while the Dow Jones careened nearly 540 points lower.
It was another rough day for Tesla while Apple continued to struggle with AI adoption and endured its worst week since 2020. Energy and travel stocks also sagged on concerns consumers would curb discretionary spending.
Thursday’s dive occurred despite fairly positive economic news released during the session. The producer price index (PPI) released Thursday followed up Wednesday’s consumer price index (CPI), which rose less than expected to 2.8% for the year. While the results of the CPI and PPI were cooler than predicted, they were considered unlikely to convince the Federal Reserve to reduce interest rates next week as tariffs and concerns about inflation and even a recession complicate the overall economic outlook.
Other economic news Thursday included a decline in first-time unemployment claims. Claims by federal workers remained fairly steady and below historical averages as uncertainty over severance pay and rehiring clouded the situation.
Dollar: The latest volley of tariff threats supported the dollar on Thursday. Results were mixed but generally higher, including a decline against the yen and gains for the Dollar Index and against the euro. The Dollar Index improved to 103.8 after being unable to capitalize on a brief peak above 104.0. The dollar was also higher against the euro, but the euro remained around the highs for the month at 1.085.
The yen was higher against the dollar in the run-up to next week’s Bank of Japan policy meeting, which is still expected to result in no change to current interest rates but could set the stage for a cut of 25 basis points in the third quarter, according to a Reuter survey of economists.
Treasuries: The combination of the PPI and CPI put pressure on Treasury yields Thursday. The 10-year yield fell below 4.30% during the afternoon hours while the 2-year eased to 3.95% after beginning the session near 4.00%. The cooler inflation numbers helped assure investors that interest rates would remain on a path to a reduction, although not next week when the Fed convenes its March policy meeting.
Overseas, the U.S. tariff onslaught has economists seeing a potential recession developing in Germany at the same time Western Europe is facing increased spending to counter Russia. Germany’s 10-year yield leveled off around 2.87% after beginning the month at around 2.50%.
The head of the German central bank said Thursday the tariffs could cause a recession as early as this year if they are fully implemented. The Bank of Canada lowered its prime rate on Wednesday. Officials said the economy’s firm footing in 2024 was being undermined by U.S. tariffs.
Energies: Overall concerns about the world economy and a potential increase in crude supplies left the oil market in a bearish mood on Thursday. April WTI lost about a dollar at around $66.50 and remained below the moving average despite sticking around the previous day’s range. April gasoline was also lower on the day but maintained an upward trend that developed early in the week after prices sagged to a 3-month low below $2.10.
Natural gas prices fell to $4.05 after the Energy Information Administration reported a slightly higher-than-expected storage withdrawal of 62 billion cubic feet last week. Meanwhile, Reuters reported Thursday that the Kremlin was sounding out business leaders about which western sanctions should be lifted in return for a ceasefire deal in Ukraine; the energy sector and access to international payment systems were the most popular, the report said.
Metals: Gold futures moved solidly higher on Thursday as concerns about the economic fallout from the sprawling and erratic U.S. tariff program. Gold traders largely ignored the firming dollar and the cooler PPI report to push April futures to a 12-momth high a couple of dollars short of $3,000 before settling slightly to $2,994. May silver rose above $34 late in the day while May copper reached a 6-month high of $4.93 during the session.
Commerce Secretary Howard Lutnick said Wednesday that copper tariffs would likely be imposed as the United States seeks to expand its domestic metals production on national security grounds.
Livestock: An increase in technical buying nudged the cattle market a bit higher on Thursday. April and June live cattle saw similar volumes and posted slight gains that led April to $202 and June modestly above $198. April feeder cattle traded within a tight range and were down nearly a dollar and just below $280 at the bell despite setting a new 12-month high above $282 earlier in the session. Lean hogs remained in a slump amid concerns over tariffs cutting into exports; the USDA said last week’s pork exports fell to a marketing-year low.
April hog prices rallied at midday but then slid below $86 and were below the moving average. Analysts said this time of year tends to be slow until summer pork demand picks up.
Live Cattle: Thursday’s slaughter of 121,000 pushed the total for the week to 483,000 compared to 467,000 last week. The cash market remained light but there was enough activity to flush out a price of around $200. Cash prices in Canada have been widely varied due to tariff uncertainty and, according to Canfax, the slaughter has been running 10% below last year.
Feeder Cattle: The CME Index moved higher to above $281 as of Tuesday. Corn futures rallied above $4.60. Hot dry winds raised the fire and dust threat in the Plains, but temperatures should ease back to seasonal norms next week. The auction in Woodward, Oklahoma showed steers more than $10 higher than last week with moderate demand and two-thirds of the supply over 600 pounds.
Lean Hogs: The week’s slaughter reached 1,954,000 compared to 1,817,000 a week ago and 1,894,582 at this time last year. Cash price, however, declined more than $2 Thursday to an average of $89.15, although the Eastern Corn Belt was $88.40. The pork cutout firmed up late Thursday to above $97 and near the 5-day average. Ham and belly primals were sharply higher.