Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices were higher last week, with the S&P 500 Index up just under one percent in total return following a modest decline in the prior week. The Nasdaq Composite added 1.3% and the Dow Jones Industrial Average rose 0.9% in total return for the week. U.S. Treasury yields were lower for the week, with the 2-year yield falling as low as 3.85% before rising to finish the week just above four percent. A significant drop in the S&P 500 on Tuesday and a jump on Thursday broke a pattern of calmer market days in April, during which the index had only a few days with a move in either direction of greater than one percent. For the full month of April, the S&P 500 was up about 1.5%, adding to a year-to-date gain.
Corporate earnings reports were a major theme, as 180 of the S&P 500 constituents reported last week. Takeaways were mixed, though earnings season continues to broadly come in better than anticipated. According to FactSet, earnings are being reported at 6.9% above consensus on average. Themes include consumer spending that is moderating but resilient, a housing market that is stabilizing and corporate cost-cutting efforts that are increasingly common.
On the economic calendar, the initial reading on first quarter economic growth came in below expectations, slowing down more than expected from the fourth quarter but remaining decidedly positive. Durable goods orders were strong on the headline number, but core capital goods orders, a proxy for business investment, were weaker. New home sales were better than expected in March, while pending home sales missed consensus estimates. Core personal consumption expenditures, the Federal Reserve’s preferred measure of inflation, was little changed month-over-month in March.
In the week ahead, all eyes will be on the May Federal Open Market Committee Meeting. Federal Reserve officials are expected to raise rates by 25 basis points, and possibly signal a pause in rate hikes ahead. It is another busy week for first quarter earnings reports and economic releases include job openings and the April employment report.
As always, we’ll be watching and reporting back to you. Thank you.
