Weekly Update - May 04, 2018
- Stock markets sustained another week of volatility with mixed results across Asian, European and U.S. bourses. Strong earnings still provided support, though tempered by concerns about trade policy, inflation and job growth. Oil prices rose during the week, whereas gold fell. The 10-year U.S. Treasury yield pulled back from 2.98% last week to close at 2.95%.
- As of May 4, with 81% of S&P 500 companies reporting first-quarter results, 78% had exceeded earnings expectations, while 77% had beaten sales expectations. FactSet estimated the S&P 500 index’s first quarter earnings growth at 24.2%, which if it holds, will be the highest rate since third quarter 2010. The index’s 12-month forward P/E ratio stood at 16.0, below the five-year average of 16.1 but above the ten-year average of 14.3. Apple, McDonalds and Shutterfly impressed this week; Cooper Tire, Estee Lauder and Sally Beauty disappointed.
- Job growth continued in April as nonfarm payrolls increased by 164,000, though the report disappointed expectations of >190,000. The annual unemployment rate fell to 3.9%, its lowest level since 2000. Despite low unemployment, annual wage growth remained sluggish at 2.6%.
- The Department of Commerce reported personal income rose 0.3% in March, level with February’s gain but below consensus for 0.4%. Personal spending rose 0.4% as expected.
- Commerce also reported that annual inflation, as measured by core personal consumption expenditures — excluding food and energy — hit 1.9% in March. This neared the Federal Reserve’s 2.0% target, raising questions whether the Fed might step up its pace of hiking interest rates
- The National Association of Realtors reported that pending home sales rose 0.4% percent in March. Despite marking two months of increases, the finding disappointed expectations and pending sales were down 3.0% compared to a year ago. The Commerce Department reported that March construction spending fell 1.7% after rising in February.
- April ISM manufacturing fell to 57.3 from March’s 59.3 level, touching a nine-month low as the report highlighted increasing input cost pressures. New orders, production and employment were down, though each remained in expansionary territory. April Markit manufacturing PMI aligned with expectations at 56.5, but also noted price pressures.