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2020 Financial Markets Update

Week In Review 4.26.2019

April 26, 2019

Week in Review

Week Ending: April 26, 2019

Recap & Commentary

Market results for the week were mixed. While domestic equities closed at new all-time highs thanks to better-than-expected earnings and U.S. GDP data, international markets closed down on various concerns.

In Europe, the Euro fell to a near two-year low against the dollar due to ongoing concerns about slowing growth. Adding to the concerns, a measure of German business sentiment fell for the seventh time in eight months.

Emerging market returns were impacted by China, where equity markets posted their largest weekly decline since October 2018. After posting better-than-expected first quarter GDP growth of 6.4%, there is concern that the government will reduce its policy support. A statement by the country’s Politburo mentioning “structural deleveraging” reinforced those concerns.

Following a busy week in which 150 companies reported earnings, 46% of S&P 500 companies have now reported first quarter results. To date, 77% have beaten their earnings estimate, while 59% have beaten their sales estimate. Analysts now expect earnings growth for the quarter to be -2.3% vs. -3.9% last week.  Next week will again be busy with another 164 companies reporting.

Economic Commentary

GDP—US real GDP increased at a 3.2% annualized rate in Q1, the best first quarter growth rate in four years, and above the consensus estimate of 2.5%. The Bureau of Economic Analysis estimates that the partial government shutdown subtracted 0.3 percentage points from growth in Q1 and 0.1 points in Q4-2018. Without that interruption, growth would have been stronger. Q1 growth was driven by a surge in inventories, a large contribution from net exports, and a pickup in state and local government spending. Consumer spending and CapEx growth, however, moderated significantly, perhaps highlighting certain economic vulnerabilities. Importantly, the data suggests that a near term recession is unlikely, and it also continues to support the Fed’s decision to remain patient with respect to future rate increases.

Housing data was mixed. New home sales rose well ahead of expectations increasing 4.5% in March, while sales of existing homes fell -4.9% in the month. That said, the expectation remains that the housing sector is set to improve modestly through year-end, as wages firm and mortgage rates continue to track lower.

Manufacturing—Durable goods orders rose 2.7% in March, the most in seven months, and above the consensus of 0.8%. Core capital goods orders (ex. Aircraft and other transportation) climbed 1.3%, its third straight gain, and the most since last July. On a year-over-year basis, however, durable goods orders eased to 4.2%, the least since May 2017, consistent with slowing output growth.

Consumer Sentiment improved in the second half of April, but remains below the cycle peak it reached in March of 2018, which suggests a slower pace of consumer spending growth in the near-term.

Of Note

The U.S. announced that starting May 1, it will end sanctions waivers for countries importing Iranian oil, including India and China. The waivers were granted last November after the U.S. withdrew from the Iran nuclear deal and moved to reimpose severe sanctions on Iran.

Market Indices Week of 4/26

S&P 500                            1.2%

Small Caps                       1.7%

Intl. Developed               -0.5%

Intl. Emerging               -1.4%

Commodities                  -1.2%

U.S. Bond Market            0.2%

10-Year Treas. Yield         2.50%

US Dollar                           0.7%

WTI Oil ($/bl)                      $63

Gold ($/oz)                      $1,285

The Week Ahead

  • Personal Income & Outlays
  • S&P Case-Shiller HPI
  • Factory Orders
  • Construction Spending
  • ISM/PMI Manuf. Index
  • ISM/PMI Services Index
  • Employment Situation Rep.
  • Int. Trade in Goods
  • Productivity and Costs
  • Consumer Confidence

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