Weekly market update
Stocks rallied late in the week amidst broadly improved market sentiment. Initially, investors expected earnings decline after tax cuts boosted earnings last year, making it harder to maintain the same growth pace. Following an unexpectedly strong start to Q1 earnings season in the U.S., the NASDAQ and the S&P 500 finished the week higher, but the Dow ended the week down 0.03%.
After a choppy week in the bond market, yields surged as risk-on sentiment re-emerged. With the FED indicating a pause in rate hikes and investors pivoting into stocks, rates rose across the entire yield curve.
On the economic front, Consumer Price Index (CPI) data was mixed, with core CPI at 0.1%, below expectations, while the headline CPI surprised to the upside at 0.4%. The sharp increase in gas prices is mostly to blame for the increase. Evidence of rising inflation was otherwise largely absent.
The number of people who applied for unemployment benefits in early April fell below 200,000 for the first time since 1969, the latest sign that an ebullient labor market remains an island of strength for a slower-growing U.S. economy.
The jolt in Job Openings and Labor Turnover (JOLTS) report for February figure on job openings is the first sign that maybe the demand for labor is taking a breather. In particular, there is clear slowing in manufacturing & trade and by extension transportation, and that was apparent in the report. This was the lowest level since March of last year.
Even amid some global geopolitical uncertainty, the U.S. economy continues to grow, employment and wages are going up, inflation is moderate, financial markets are healthy and consumer and business confidence remain strong. Stocks on all-time highs, unemployment below 4%, companies buying up their own stock like a game of hungry hippos. If the Fed can’t raise rates in this environment, they can’t ever raise rates.
Trade war—European addition—President Trump has threatened Europe with billions in tariffs. Trade tensions between the U.S. and the European Union intensified Tuesday following a World Trade Organization ruling over subsidies for Airbus. The WTO ruled last year that the subsidies caused “adverse effects to the U.S.,” prompting Washington to consider $11 billion worth of retaliatory tariffs on a range of European goods.
This week, earnings season will kick into high gear and we will be monitoring those for any surprises—positive or negative. We will get the latest read on two regional FED reports—New York and Philly. We will get the latest read on the housing market. So, stay tuned and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
April 15, 2019
