Hello, this is Tom Jalics, Chief Investment Strategist at Fifth Third Bank
Major U.S. equity indices were modestly lower last week as the S&P 500 was down by less than 1.0% for a third-straight week, the longest such streak since August 2021. For the week, the Dow Jones Industrial Average declined by 0.2%, the S&P 500 was down 0.1%, and the Nasdaq Composite ended the week 0.4% lower. U.S. Treasury yields moved modestly higher last week with the 10-year U.S. Treasury note ending the week at 3.57% and the 2-year U.S. Treasury note ending the week at 4.18%. The 2-year/10-year U.S. Treasury yield curve remained inverted, finishing the week 61 basis points inverted. The U.S. dollar index was up 0.2% for the week versus a basket of global currencies. Gold finished the week 1.3% lower, ending the week at $1,983/ounce. West Texas Intermediate (WTI) crude oil fell by 5.6% for the week, ending the week at $77.87/barrel, its first weekly decline after four straight weekly gains.
Economic releases and earnings data were in focus last week. On the economic front, the major releases offered mixed signals. Friday's Markit flash manufacturing PMI rose into expansion territory for the first time in six months, while services PMI was the best in a year. Disappointingly, prices for both indices rose at the fastest pace since mid-2022. The April Empire Manufacturing Index posted a surprise expansion for the time after four consecutive negative prints. However, the April Philadelphia Fed manufacturing index missed, falling to the lowest since May 2020. The initial jobless claims report showed unemployment claims rose by 5,000 to 245,000 in the week ending April 15th, worse than expectations for 240,000 applications. This was a fourth-straight weekly miss, the longest streak since July. Continuing claims were also at their highest level since November 2021. Initial and continuing claims offer some evidence of a cooling in the red-hot labor market.
On the earnings front, according to FactSet's latest Earnings Insight, the blended quarter over quarter earnings decline for the first quarter was -6.2%, however, this was a 0.5% improvement from the previous week. With 18% of the companies in the S&P 500 having reported actual results, 76% have reported actual earnings per share (EPS) above estimates, which is below the five-year average of 77%, but above the ten-year average of 73%. In aggregate, reported earnings thus far are 5.8% above estimates, which is below the five-year average of 8.4% and below the ten-year average of 6.4%. In general, earnings reports have been less negative than feared, offering some optimism that the worst of the earnings degradation has already occurred.
This week several key economic data will be released. The Case-Shiller National Home Price Index for February as well as new and pending home sales for March will be released on Tuesday. Tuesday also brings us a consumer confidence reading from the Conference Board. On Thursday, the Bureau of Economic Analysis (BEA) will release its estimate for first quarter U.S. gross domestic product (GDP). Friday brings a consumer sentiment reading from the University of Michigan. Investors will also receive a Friday update on inflation with the Personal Consumption Expenditures (PCE) Price index for March, the Federal Reserve’s preferred measure of inflation. Finally, earnings season rolls on with some of the largest companies in the world reporting earnings including big tech companies Apple, Amazon, Alphabet, Microsoft, and Meta Platforms.
As always, we will be watching and reporting to you next week. Thank you.
