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2020 Financial Markets Update

Week in Review: April 28, 2023

May 1, 2023

Recap & Commentary

Markets ended the week higher as investors digested a busy corporate earnings and economic data calendar. The market’s modest gains masked elevated volatility which saw the S&P 500 experience its largest daily decline in a month and largest daily gain since the start of February.

A full economic calendar was headlined by 1Q23 GDP, which grew just 1.1%, well below the consensus forecast of 2.0%, and the 2.6% pace recorded in 4Q22. Encouragingly, however, consumer spending jumped to 3.7%, its highest level since 2Q21. Curiously, spending on goods, not services, led the way, up 6.5% for the quarter.

The Federal Reserve released its post-mortem report detailing the collapse of Silicon Valley Bank, attributing the failure to “mismanagement” by senior leaders who failed to “manage basic interest rate and liquidity risk.” The report also faulted Federal Reserve supervisors who “failed to take forceful enough action” even after identifying vulnerabilities. The report concluded by identifying four broad themes for consideration by both the Fed and policy makers to prevent similar future occurrences: 1) enhance risk identification, 2) promote resilience, 3) change supervisor behavior, and 4) strengthen processes.

Through Friday, 53% of S&P 500 companies had reported 1Q23 with 79% beating earnings expectations and 74% beating revenue expectations. According to industry group FactSet, consolidated earnings growth for the quarter is expected to be -3.7%, up from the -6.2% forecast from just a week ago.

Economic Commentary

New home sales jumped 9.6% in March to their highest level in a year and are now 26% above their cycle low set last July. Pending home sales fell 5.2% in March, well below the consensus estimate of a 0.5% increase. This was the first decline in four months, and the largest drop since September. Pending home sales are down 23% from a year ago.

Inflation, as measured by the personal consumption expenditures price index (PCE), eased slightly, increasing 0.1% in March, compared to February’s 0.3% pace. Core PCE  increased 0.3% in March unchanged from February. On a year-over-year basis, core PCE ticked down to 4.6% from a revised 4.7%. Personal incomes rose another 0.3% in March, following a similar increase in February, while consumer spending was flat from the prior month. Increased spending on services was almost entirely offset by decreased  spending on goods.

Consumer confidence fell in April to a six-month low. Future economic conditions and job availability both deteriorated, as the jobs outlook was the worst since March 2013. Consumer inflation expectations for the year ahead came down slightly but are still meaningfully higher than pre-pandemic levels

Durable goods orders rebounded 3.2% in March, the first increase this year and second largest gain since July 2020, driven by a 78% surge in civilian aircraft orders. Excluding transportation, core orders were up a much smaller 0.3%. On a year-over-year basis, durable goods orders eased to 3.0%, the slowest pace since October 2020, while core orders slowed to 3.2%, the least since early 2021.

Of Note

Banking regulators worked feverishly over the weekend to orchestrate a sale of First Republic Bank. Since the collapse of Silicon Valley Bank, First Republic’s clients have withdrawn over $100B in deposits leaving the bank close to it own collapse.

Market Indices (As of 04/28)

S&P 5000.9%
Small Caps-1.3%
Intl. Developed-0.1%
Intl. Emerging-0.4%
U.S. Bond Market0.8%
10-Year Treas. Yield3.42%
U.S. Dollar-0.1%
WTI Oil ($/bl)$77
Gold ($/oz)$1,998

The Week Ahead

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

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