Weekly market update
The major averages finished the week slightly higher, despite a sharp selloff on Friday, as the ratcheting back of geopolitical tensions and a round of much better earnings from a number of the big banks helped lift the major averages.
Interest rates had been slowly creeping up over the last couple of weeks, Thursday morning they hit 2.9% on the 10-year mark and stocks sat straight up and took notice but there wasn’t a panic, however this morning we see the 10-year U.S. Treasury yields are approaching the 3% range.
Across the pond, investors have also been focused on geopolitical tensions, trade war concerns and the possibility of a slowdown of economic growth, but the averages are still lingering around a 3-month high.
STOCKS
The earnings season got off to a good start as we heard from a number of big banks. Following the upbeat reports from JP Morgan, BlackRock and Citi, Goldman Sachs and Morgan Stanley blew the doors off expectations. They were all benefiting from lower tax margins and more active (volatile) markets.
The bad news came from Phillip Morris and Altria who got absolutely smoked after turning in poor results.
ECONOMY
It was a quiet week for the economic calendar, but some very important numbers for retail sales, housing starts and industrial production.
Retail sales came in up 0.6% growth stopping a 3-month skid. This was above consensus estimates. Autos were the big story in March, jumping 2.0% and finally shaking off the long lull following the replacement surge of September’s hurricanes.
The residential construction business had a very strong March. Housing starts easily topped estimates at a 1.319 million annualized rate while permits came in just shy of the top estimate at a very strong 1.354 million.
Industrial production rose a very solid 0.5% in March for a 4.3% year-on-year rate with mining once again leading the report. Utilities also had a good March, with output up 3.0% in the month following a 5.0% weather-related decline in February. Year-on-year, utility output is up 5.3%.
THE WEEK AHEAD
It will be a big week for corporate earnings. 42% of the S&P 500 is set to report and the big focus will be on tech names like Microsoft, Amazon, Facebook and Alphabet, the parent company of Google.
There will be a lot of focus on interest rates here – we are watching the yield on the 10-year U.S. Treasury which is quickly approaching the psychological 3% level as I mentioned, which has caused some angst for investors before. Some analysts don’t think we will see a big surge once we break it because we have seen the geopolitical tensions dialed back.
On the economic front, we will get housing data, consumer confidence, durable goods, several regional FED reports and we will have to wait until Friday when we get the first read on Q1 2018 GDP.
We’ll still keep watch on the political and geopolitical landscape, so stay tuned and we’ll keep you posted.
Todd Day, Portfolio Manager
Horizon Financial Services, LLC
April 23, 2018
