Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
The S&P 500 made gains last week for the fourth week of the past five, despite a Friday selloff. Treasuries were weaker with the yield on the 10 Year Treasury moving back above 3.50 percent. The dollar was down, completing a fifth-straight weekly decline, the longest streak since mid-2020. Gold finished the week down half a percent, while WTI crude was up 2.3 percent for the week.
Data releases showed that inflation cooled off last month. March’s headline Consumer Price Index (CPI) came in lower than expected and down from February's 0.4 print. Core CPI, which excludes food and energy, came in at 0.4 percent, was in line with consensus, though down from last month's 0.5 percent. Thursday's March headline Producer’s Price Index (PPI) was down 0.5 percent month over month, cooler than consensus for 0.1 percent, a second-straight monthly contraction. PPI year-over-year of 2 percent was the lowest since January 2021. However, despite the cooler inflation numbers, Fedspeak mostly hit the higher-for-longer narrative as Fed officials continued to argue that inflation is still too high.
Other data releases also suggested a slowing economy. March retail sales were down 1.0 percent month-over-month, steeper than consensus for a 0.4 percent monthly decline, though takeaways noted the deterioration wasn't enough to push the Fed off its rate path.
The minutes to the March FOMC meeting showed staff projections at the time of the meeting to include a mild recession starting later this year driven by the recent banking turmoil. Many officials also said that the banking sector developments led them to lower their assessments of the fed funds rate that would be sufficiently restrictive. While the minutes said that some officials considered a pause given the banking turmoil, takeaways noted that the Fed remains committed to the higher-for-longer strategy given inflation.
We have a pretty active economic calendar this week. Starting on Monday, we get the Empire State Index and NAHB builder confidence. On Tuesday we get housing starts and permits. Then on Thursday we get the Philly Fed Index and existing home sales. Earnings season meaningfully ramps up this week. A handful of banks will lead the way early in the week, but we’ll also see first quarter results from Netflix, Tesla, and Procter & Gamble.
As always, we will be watching and reporting back to you next week. Thank you.
