Week in Review
Week Ending: Friday, April 19, 2019
Recap & Commentary
Markets effectively tread water during the holiday-shortened week, with most asset classes posting small gains or losses. Mixed U.S. economic data seemed to be largely offset by more upbeat data out of China, while a number of companies including many of the big banks reported first quarter earnings.
China released a slew of data- GDP, retail sales, fixed asset investment, retail sales- all of which came in as expected, or better, suggesting that recent economic weakness has at least stabilized for the time being. That was good news for investors who continue to worry about the impact of trade tensions with the U.S. on the world’s second largest economy.
Through Friday, 15% of S&P 500 companies had reported earnings. Thus far, 78% of reporting companies have beaten their consensus earnings estimate, while 53% have beaten their sales estimate. According to industry group Factset, first quarter earnings growth is currently expected to decline -3.9%, up slightly from the -4.3% expected last week. This upcoming week will be busy, with another 150 companies reporting. Investors will remain focused on trying to discern how current trade tensions and slowing global economic growth are impacting corporate profits.
Leading Indicators- rose more than expected following two months of effectively no change. Labor markets, consumers’ outlook, and financial conditions were the largest contributors. Despite the monthly uptick, the overall trend continues to moderate, suggesting longer-term growth of ~2%.
Retail Sales- posted impressive headline growth of 1.6%, twice the consensus expectation and up from February’s -0.2% decline. Core sales, which exclude autos and fuel were also significantly better than expected. At the margin the data was positive for first quarter GDP.
Industrial Production- fell -0.1%, below consensus expectation and down from the prior month. Manufacturing was flat, missing the consensus expectation, but improved from the prior month.
Housing Starts- Housing data continued to disappoint with starts and permits coming in below consensus expectations and down from the prior month. Y/Y, starts and permits were down -14.2 and -7.8%, respectively. Starts are now at their lowest level since May 2017. While lower mortgage rates may eventually help building activity, that is not currently the case.
International Trade- The trade deficit shrank more than expected thanks to strong exports and a decline in imports. Similar to retail sales, the narrowing of the trade deficits will benefit first quarter GDP.
On Thursday, video-conferencing provider Zoom Video Communications held its IPO and enjoyed a 72% increase in its share price, giving the company a market value of ~$16B. In a good reminder to investors to always make sure you know what you are investing in, Zoom Technologies, a China-based provider of wireless communications equipment, which last reported sales in 2013, and has a market value of just $8M, saw its shares rise by as much as 124% on Thursday. Apparently some investors were so eager to participate in the hot IPO that they failed to confirm the company in which they were investing.
Market Indices Week of 04/19
S&P 500 -0.1%
Small Caps -1.2%
Intl. Developed 0.3%
Intl. Emerging 0.3%
U.S. Bond Market 0.1%
10-Year Treas. Yield 2.56%
US Dollar 0.5%
WTI Oil ($/bl) $64
Gold ($/oz) $1,278
The Week Ahead
- Chicago Fed NAI
- Existing Home Sales
- New Home Sales
- Durable Goods Orders
- Consumer Sentiment
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