Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices dropped last week, as investors assessed the latest corporate earnings reports and prepared for the next Federal Reserve meeting. The S&P 500 Index fell 3.3% in total return for the week, while the Nasdaq Composite dropped 3.9% and the Dow Jones Industrial Average fell 2.5%. The major benchmarks posted sharp declines for the month, with the S&P 500 down 8.7% in April and now down 12.9% year-to-date. Treasuries were little changed last week, as investors firmed expectations for a half percentage point hike in interest rates at next week’s Fed meeting.
On the economic calendar, the first reading on first quarter U.S. economic growth unexpectedly showed a contraction. U.S. gross domestic product (GDP) shrank for the first time since 2020, falling at a 1.4% annualized rate in the first three months of the year, following a 6.9% annualized increase in the fourth quarter of 2021. The contraction was caused by an increase in imports and a decline in exports, along with a slower buildup of inventories. Consumer spending and business investment remained strong. Personal consumption, the largest part of the U.S. economy, rose at an annualized 2.7% rate in the first quarter. Core personal consumption expenditures, a measure of inflation, rose at an annualized 5.2% pace, up from 5.0% in the fourth quarter. Consumer confidence eased in April, with the Conference Board’s index down to 107.3 from an upwardly revised 107.6 reading in March. The current conditions component declined, while the expectations index improved. Housing data was mixed, as pending home sales and new home sales data showed steep declines in March though housing price indices from the Federal Housing Finance Agency and S&P CoreLogic showed better than expected increases in February.
In the week ahead, the Federal Reserve meets to set monetary policy. Expectations are for a 50-basis point hike to the Fed Funds rate, twice the magnitude of the hike in March as inflation continues to surge. The Bank of England also sets policy and is expected to raise rates again. The U.S. economic calendar includes the Institute for Supply Management’s Manufacturing Purchasing Managers Index, the Job Openings and Labor Turnover Survey (JOLTS report), factory orders and the trade balance. On Friday, we’ll get the monthly payrolls report from the Bureau of Labor Statistics, expected to confirm strength in the labor market in April.
As always, we’ll be watching and reporting back to you. Thank you.