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2020 Financial Markets Update

Week in Review: April 26, 2024

April 29, 2024

Recap & Commentary

Markets ended the week higher with the S&P 500 snapping its three-week slide, while enjoying its best weekly return since November. Despite further signs that the Fed’s fight against inflation will be protracted, investors were seemingly heartened by weaker-than-expected 1Q GDP- which could in theory help ease inflationary pressures- and strong earnings reports from tech bell weathers Google and Microsoft.

Interest rates edged slightly higher with the 10-Year Treasury yield briefly surpassing 4.7% for the first time since November. This upcoming week’s FOMC meeting will be critical to determining the near-term path of interest rates. A more hawkish Fed tone would likely propel interest rates higher.

In 2023, economic growth consistently surprised to the upside helping the economy avoid a widely anticipated recession. Entering 2024, markets widely expected the Fed to cut rates multiple times during the year. However, economic data in 1Q24 that continued to surprise to the upside gradually dampened those expectations. First quarter’s weaker-than-expected GDP growth could thus be viewed as a positive in the context of furthering the case for rate cuts later in the year. However, inflation, which remains stubbornly elevated will need to show signs of shifting sustainably lower before the Fed is likely to commence cutting rates.

Through Friday, 46% of S&P 500 companies had reported earnings.  Thus far, 77% have beaten their consensus estimate. According to industry group FactSet, consolidated earnings growth for 1Q24 is expected to be 3.5%.

Economic Commentary

Economic data came in worse than anticipated in a busy week that was headlined by 1Q24 GDP and Core PCE, the Fed’s preferred inflation gauge.  Real GDP grew at a 1.6% annualized rate in 1Q24, far lower than the 2.5% consensus expectation. The slowdown from last quarter’s real GDP growth of 3.4% was largely due to the most volatile components- a wider trade deficit and continued slowing in  inventory accumulation to start the year. Consumer spending took a step back from the 4Q23 but remained at a healthy 2.5% pace due to strong services spending, which grew at a 4% annualized rate. The report also reaffirmed concerns about the path of inflation this year, as the GDP prices index increased from 1.6% in the 4th quarter to 3.1% in the 1st quarter.

The challenges of reigning in sticky inflation were on display in the March PCE report as well, with incomes and spending also on the rise.  Core prices rose 0.3% during the month, and 2.8% from a year ago. Personal income rose 0.5% in March, but continued to lag consumption, which increased 0.8%. In the last year, incomes have increased 4.7%, while spending has increased 5.8%. Household savings continued to support spending during the month, with the personal savings rate falling to 3.2%, the lowest level since October 2022.

At the end of the week markets were pricing in one to two rate cuts this year, with a first cut expected at the September FOMC meeting.

Of Note

The Dept. of Transportation finalized new rules requiring airlines to provide automatic cash refunds to travelers within days of a cancelled flights and those that experience “significant” delays, defined as three hours for domestic flights and six hours for international flights.

Market Indices   (As of 04/26/2024)

S&P 5002.7%
Small Caps2.8%
Intl. Developed1.7%
Intl. Emerging3.7%
Commodities0.0%
U.S. Bond Market-0.1%
10-Year Treas. Yield4.67%
U.S. Dollar0.4%
WTI Oil ($/bl)$84
Gold ($/oz)$2,351

The Week Ahead

  • April Employment Report
  • JOLTs Report
  • ISM Manufacturing
  • ISM Services
  • Consumer Confidence
  • Weekly Jobless Claims

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