April 28, 2024
Volume 11, Issue 17
Weekly Recap
The S&P 500 and most other major domestic equity benchmarks snapped a string of three consecutive weekly losses as stocks responded to the busiest week of the first-quarter earnings reporting season. As of the end of last week, analysts polled by FactSet were expecting overall earnings for the S&P 500 to have increased 3.7 percent in the first quarter of 2024 relative to the year before, with “both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises… above their 10-year averages.”
The technology-heavy Nasdaq Composite performed best, helped in part by strength in Apple and a late rebound in chipmaker NVIDIA. Shares in Google parent Alphabet also surged late last week following its announcement of better-than-expected first-quarter earnings along with the company’s first dividend payment. Conversely, Facebook parent Meta Platforms fell sharply – at one point erasing nearly $200 billion in market value – after CEO Mark Zuckerberg announced plans to continue heavy spending on artificial intelligence and other new technologies.
Last week started off strongly, which seemed to be due to traders trying to capitalize on recent declines in the tech sector as well as short covering, or buying to limit potential losses on bets that stocks will decline. The buying continued Tuesday, due in part to some downside surprises in economic data – interpreted as good news for markets because of the reduced pressure it implied on inflation and interest rates. S&P Global reported that its gauge of U.S. manufacturing activity fell back into contraction territory (below 50.0) in April, at 49.9, well below consensus estimates of around 52.0. S&P’s gauge of services sector activity, while still indicating expansion, also missed expectations, at 50.9 versus 52.0.
Unlike Tuesday, Thursday’s bad economic news was treated as bad news. The Commerce Department’s advance estimate showed the economy expanding at an annualized rate of 1.6 percent in the first quarter, well below consensus estimates of around 2.5 percent and the slowest pace of growth in nearly two years. A sharp slowdown in government spending and a widening trade deficit were partly to blame, but consumers also continued to rein in spending, particularly on goods. Separate data released Wednesday showed that businesses continued to increase capital spending in March, but at a slower pace (0.3 percent) than in February, where the gain was revised lower to 0.4 percent.
Inflation data released Thursday also seemed to concern investors and raise worries that the U.S. might even be in danger of “stagflation,” or rising prices alongside flagging growth. The Commerce Department reported that its core (ex-food and energy) personal consumption expenditures (the Fed’s preferred inflation gauge) rose at an annualized rate of 3.7 percent in the first quarter, more than expected and well above both the fourth quarter’s 1.7 percent increase and the Federal Reserve’s 2 percent long-term inflation target.
Friday’s rebound in stocks was largely due to better news on the inflation front, with futures jumping after the Commerce Department’s release of monthly core PCE data. Core PCE inflation continued to decline on an annual basis in March, if ever so slightly, falling to 2.82 percent from 2.84 percent in February, continuing a downward trajectory that began in October 2022. Friday also brought news, however, that the University of Michigan’s revised gauge of consumer sentiment in April fell back from a nearly three-year high in March, reflecting, in part, higher inflation expectations. The yield on the benchmark 10-year U.S. Treasury note decreased somewhat following the release of Friday’s PCE data but still ended the week near its highest level in almost six months. Overall, yields drifted slightly higher across the curve.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
The core personal consumption expenditures price index excluding food and energy, the Fed’s preferred inflation indicator, increased 2.8 percent from a year ago in March, unchanged from February but slightly higher than expected. Personal spending rose 0.8 percent for the month, more than the personal income increase of 0.5 percent. The personal saving rate fell to 3.2 percent, down 0.4 percentage points from February and 2 full percentage points from a year ago.
A recent jump in U.S. government-bond yields has left investors pondering whether the benchmark 10-year Treasury yield will keep rising all the way to 5 percent, a scenario that seemed remote just a few months ago. The rate settled Monday at 4.67 percent, up from 3.86 percent at the start of the year.
Activity in the U.S. private sector slowed in April amid signs of a pickup in other leading economies. That’s a sign that global growth could be more broadly balanced this year.
Mortgage rates have surged past 7 percent and home sales in March posted their biggest monthly drop in more than a year, renewing pressure on the U.S. housing market as uncertainty over real-estate commissions buffets the industry. If you want a single number to capture America’s economic stature, here it is: This year, the U.S. will account for 26.3 percent of the global gross domestic product, the highest in almost two decades.
Charts of the Week
Good Reads
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
- At The Money: Bill McBride on What Data Matters and What Doesn’t (Barry Ritholtz) How to Prepare Every Part of Your Life for a Recession (Tanza Loudenback)
- What to Do With Bonds When Inflation Won’t Die (Jason Zweig)
This is the best thing I saw or read in the last week. The sweetest. If it weren’t so awful, this would be the funniest. The most harrowing. The most horrific. The most incredible. The most interesting. Privilege. The Travel Team Trap. Guilty. RIP, Richard Henderson.
Americans spent more than $100 billion on lotteries in 45 states and the District of Columbia last year – a haul that, combined, would make U.S. lotteries the country’s ninth-most profitable company.
“You make enough mistakes by mistake, don’t make one on purpose.”
~ Eugene Fama
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.
