In the markets:
Stocks recorded mixed returns as attention focused on the season’s busiest week of quarterly earnings reports. About 35% of S&P 500 Index companies, which together represent 44% of its market capitalization, were scheduled to release results during the week. Of note, gains in just four stocks—Microsoft, Apple, Amazon.com, and Facebook parent Meta Platforms—accounted for nearly half of the S&P 500’s strong gain. Technology led the way with the Nasdaq Composite rising 1.3% finishing the week at 12,227. The Dow Jones Industrial Average added 0.9% and closed at 34,089. By market cap, the large cap S&P 500 gained 0.9%, while the mid cap S&P 400 and small cap Russell 2000 pulled back -0.3% and -1.3% respectively. For the month of April, the Dow rose 2.5% and the Nasdaq ended flat. Large caps added 1.5%, while mid caps fell -0.9%. Small caps ended the month down -1.9%.
Overseas markets ended the week mixed. Canada’s TSX ticked down -0.3% while the United Kingdom’s FTSE 100 fell -0.6%. France’s CAC gave up -1.1%, while Germany’s DAX added 0.3%. China’s Shanghai Composite rose 0.7%, while Japan’s Nikkei gained 1%. As grouped by Morgan Stanley Capital International, developed markets finished unchanged, emerging markets added 0.3%. International markets finished the month of April, predominantly to the upside. Canada and the UK rose 2.7% and 3.1% respectively, while France and Germany added 2.3% and 1.9%. China rose 1.5% and Japan added 2.9%. Developed markets rose 2.1%, while emerging markets ticked down –0.3%.
Precious metals finished the week in the green with Gold rising 0.4% to $1999.10 per ounce, and Silver tacking on 0.7% to $25.23. The industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, ended the week down -2.3%. Oil finished down for a second week. West Texas Intermediate crude oil declined -1.4% to $76.78 per barrel. For the month, Gold and Silver rose 1.3% and 7.7% respectively, while oil added 4.9%. Copper finished the month down -4.8%.
U.S. Economic News:
Despite continued down-sizing in the tech sector, the number of Americans filing for first-time unemployment benefits pulled back last week. The Labor Department reported 230,000 people applied for unemployment insurance, down 16,000 from the previous week. In total, 1.86 million people were receiving unemployment insurance during the week ending April 15, down 3,000 from the previous week.
Home prices rose for the first time in eight months on low inventory and high demand, according to the latest data from S&P/Case-Shiller. The S&P CoreLogic Case-Shiller 20-city house price index rose 0.1% in February, as compared to the previous month. Year-over-year prices rose 0.4%, but the appreciation slowed from a 2.6% increase in the previous month. The 20-city index peaked in June 2022. A broader measure of home prices, the national index, rose in February by 0.2%, and was up 2% over the past year. The annual increase is the smallest in 11 years – since 2012. Miami, Tampa and Atlanta continue to lead the highest year-over-year gains among the 20 cities in February. Cities on the West coast continue to see weak home-price growth, from Las Vegas to San Francisco. Home prices in San Francisco are down 10% from last February.
Confidence among the nation’s consumers fell this month reflecting worries of a possible recession and softening labor market. The Conference Board reported its survey of consumer confidence dropped 2.7 points to 101.3 to its lowest level since April of last year. The index remains well below levels associated with a healthy economy. Economists had expected a reading of 104. Furthermore, Americans are even more worried about the future. The gauge that looks ahead six months tumbled to 68.1 from 74—also a nine-month low. Ataman Ozyildirim, senior director of economics at the board stated, “Purchasing plans for homes, autos, appliances, and vacations all pulled back in April, a signal that consumers may be economizing amid growing pessimism.”
Orders for goods expected to last at least three years, so-called ‘durable goods’, got a boost from orders for passenger planes, but the broader measure of orders wasn’t nearly as strong. While the headline number jumped 3.2% last month, orders ticked up only 0.3% if vehicles and aircraft are excluded. Orders for passenger planes jumped 78% in March after two big declines in a row, inflating the headline increase in durable goods. Demand for new cars and trucks was basically flat. Outside of transportation, new orders were weak. The increase in March was largely concentrated in computers and electronics. “The outlook for durable goods activity is gloomy as increasingly restrictive lending standards and relatively high interest rates will lead businesses and consumers to pull back on goods spending,” said lead U.S. economist Oren Klachkin of Oxford Economics.
Economic growth in the U.S. slowed considerably during the first three months of the year as interest rate increases and inflation took hold of an economy largely expected to decelerate even further ahead. Gross domestic product, a measure of all goods and services produced for the period, rose at a 1.1% annualized pace in the first quarter, the Commerce Department reported Thursday. Economists had been expecting growth of 2%. The growth rate followed a fourth quarter in which GDP climbed 2.6%, part of a year that saw a 2.1% increase. The report also showed that the personal consumption expenditures price index, an inflation measure that the Federal Reserve follows closely, increased 4.2%, ahead of the 3.7% estimate. Stripping out food and energy, core PCE rose 4.9%, compared to the previous increase of 4.4%.
International Economic News:
The Bank of Canada held off on hiking interest rates this month because it wanted to wait for more evidence of the effects of previous monetary tightening on growth and inflation, according to minutes from the policy-setting meeting released this week. On April 12, the central bank left its key overnight interest rate on hold at 4.50% for a second time in a row but struck a hawkish tone, playing down market expectations for a cut this year as the risk of a recession diminished. The minutes showed that the six members of the governing council noted that growth had been more robust than had been forecast in January, and that they were concerned that lowering inflation toward its 2% target in the second half of this year could be difficult. "The case to maintain the policy rate at 4.50% reflected Governing Council's view that headline inflation is coming down quickly in line with the Bank's forecast and that more evidence would be needed to assess whether monetary policy was sufficiently restrictive," the minutes said.
Across the Atlantic, the Bank of England’s chief economist Huw Pill stated companies and workers in the U.K. are trying to pass the impact of inflation onto each other — and that risks persistent inflation. “What we’re facing now is that reluctance to accept that yes we’re all worse off, we all have to take our share,” Pill said. “So somehow in the U.K., someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing energy costs through on to customers, etcetera,” he added. Pill was discussing the “series of inflationary shocks” that had fueled inflation over the last 18 months, from pandemic supply disruption and government household support programs boosting demand, to the Russian invasion of Ukraine and resulting spike in European energy prices.
On Europe’s mainland, France’s Central Bank Governor Francois Villeroy de Galhau wrote a letter to French President Emmanuel Macron stating to reduce inflation and further economic growth, the government must end the generous spending policy it adopted since the start of the COVID-19 pandemic. “All efforts must be invested in cutting back inflation, this social and economic disease which is spreading to goods and services beyond food and energy,” Villeroy de Galhau wrote. An ambitious monetary policy and several critical structural reforms are necessary to bring inflationary pressures down to “under 2%”, which the Central Bank expects to reach anywhere between the “end of 2024 and end of 2025”.
The German government doubled its growth forecast this year for Europe's largest economy after the country made it through the winter without major energy problems. It said it now expects gross domestic product to grow by 0.4% -- up from the 0.2% expansion it forecast in late January, which in turn was a big improvement on the 0.4% contraction predicted in October. The government expects growth to accelerate to 1.6% next year. The new government outlook for 2023 is a bit more optimistic than that of a group of four leading German economic research institutes, which earlier this month forecast growth of 0.3%. The International Monetary Fund recently predicted that German GDP will decline by 0.1% this year. Economy Minister Robert Habeck said the projected new level "of course is not at all satisfactory measured against normal years, but measured against what we had to fear in the winter of 2022-2023, it's quite an exclamation mark."
In Asia, as much of the world fights desperately to bring down soaring prices that are slashing living standards, China is actually trying to do the opposite. Consumer prices rose by just 0.7% in March, compared with a year earlier. Prices are stagnating or falling in China despite the fact that the People’s Bank of China (PBOC) has been cutting interest rates and pumping cash into the financial system to bolster the economy, and despite the removal of strict Covid control measures late last year. Uncertainty over the economy means Chinese households continue to stash money into savings rather than going out to spend, and companies remain wary of making new investments. “Our core view is that China’s economy is deflationary,” wrote Raymond Yeung, chief economist for Greater China at ANZ Research.
Japanese Prime Minister Fumio Kishida ordered his government to begin work on increasing the number of female executives in major companies to 30% or more by 2030. Women represented only 11.4% of executives in major listed companies in Japan in 2022, according to a Cabinet Office survey, although the figure has been rising in recent years. “We seek to have the ratio of women among executives at 30% or more by 2030 in companies that are listed on the Tokyo Stock Exchange’s Prime Market,” Kishida told officials at a meeting on gender equality. Japan is struggling to improve gender gaps in leadership positions, notably in politics and in the upper echelons of business, as well as the wage gap between male and female workers.
According to the latest information available from the Internal Revenue Service’ migration data it’s becoming clear that Illinois, New York, and California continued their streak as the nation’s biggest losers of residents and their wealth. In turn, Texas and Florida were the nation’s big winners in this ‘economic migration’, gaining 256,000 and 175,000 new residents respectively. California lost more people than any other state, with more than 332,000 net movers taking $29 billion to other states.
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