Weekly Market Update | May 19, 2024

May 19, 2024

Volume 11, Issue 20

Weekly Recap

The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all climbed to record highs last week, with the Dow crossing the 40,000 threshold for the first time. As inflation and interest rate worries appeared to dissipate, growth stocks outperformed, due in part to the lower implied discount placed on future earnings. 

The big news of the week was Wednesday’s release of the Labor Department’s April consumer price index, which came in at or modestly below expectations, in contrast to hotter-than-expected prints over the preceding three months. Headline prices rose 0.3 percent in April, a tick below expectations, while core (ex-food and energy) prices rose 0.3 percent, as expected. Inflation remained concentrated in services prices, especially transportation services costs, which rose 0.9 percent over the month and 11.2 percent over the past year. Thursday’s retail sales figure also appeared to impress investors – if through the lens of bad news for the economy being treated as good news for stocks and inflation. The Commerce Department reported that retail sales were flat in April versus consensus estimates of a 0.4 percent gain, while downwardly revising its estimate of March sales lower, from +0.7 to +0.6 percent. The data included some evidence that consumers were pulling back on discretionary spending, with sales at non-store (mostly online) retailers falling 1.2 percent, while sales at restaurants and bars continued to moderate, and even fell slightly when taking account of higher prices (retail sales data are not adjusted for inflation). The downside inflation and growth surprises helped drive the yield on the benchmark 10-year U.S. Treasury note to its lowest level in over a month at midweek. Yields ended last week lower across the yield 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 stocksKoyfin.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

U.S. inflation eased slightly in April, offering relief to investors and the Federal Reserve after a run of economic data at the start of the year revealed simmering price pressures. The Consumer Price Index, a gauge for goods and service costs across the U.S. economy, rose 3.4 percent in April from a year ago, the Labor Department announced Wednesday. Core prices that exclude volatile food and energy items climbed 3.6 percent annually, the lowest increase since April 2021.

The Producer Price Index for final demand rose 0.5 percent in April. Prices for final demand services increased 0.6 percent, and the index for final demand goods moved up 0.4 percent. The index for final demand advanced 2.2 percent for the 12 months ended in April.

Advance estimates of U.S. retail and food services sales for April 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $705.2 billion, virtually unchanged from the previous month, but up 3.0 percent above April 2023.

Industrial production was little changed in April. Manufacturing output decreased 0.3 percent; excluding motor vehicles and parts, manufacturing output edged down 0.1 percent.

For the week ending May 11, the advance figure for seasonally adjusted initial claims was 222,000, a decrease of 10,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 231,000 to 232,000. The 4-week moving average was 217,750, an increase of 2,500 from the previous week’s revised average.

The current state of the housing market.

Federal Reserve Chair Jerome Powell affirmed the central bank’s plans to hold interest rates at the highest level in more than two decades as it awaits evidence that a slowdown in inflation will resume after setbacks this year. The cozy consensus that was prevalent late last year of a just-right pairing of slowing inflation and solid growth was upended by stubbornly high inflation readings for the first few months of 2024. So investors breathed a sigh of relief on Wednesday when April’s consumer-price index came in a tad below expectations.

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.

It’s commencement season and that means commencement speeches. I love them, even Scott Alexander’s terrific fake graduation speech. The most meaningful to me are, in no particular order, those from Kurt Vonnegut (my college graduation), Peter KreeftAnne Lamott (recorded as a TED Talk years later), Atul GawandeRichard FeynmanDenzel WashingtonWilliam McRavenRandy PauschSteve JobsFrederick BuechnerFred Rogers, and David Foster Wallace. Be sure to catch the outstanding adaptation of Wallace’s speech below. It gets me every time.

The cost of inflation: A median home purchased 10 years ago at a 4.375 percent mortgage rate, refinanced at a 2.5 percent rate, has a real (after inflation) mortgage payment roughly 40 percent less today than 2014. Someone buying a median home today would have a real mortgage payment roughly 70 percent higher than 2014.

“As with so many aspects of investing, determining the proper amount of leverage has to be a function of optimizing, not maximizing.”Howard Marks

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.

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