Weekly Update - May 11, 2018
- Stocks posted strong weekly gains across the globe; investors bet that inflation and interest rates would stay contained, as first-quarter earnings season neared a strong finish. Oil prices rose after President Trump announced withdrawal from the Iran nuclear pact, but settled somewhat by week’s end. Gold posted new gains. The 10-year U.S. Treasury yield rose marginally.
- As of May 11, with 91% 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 24.9%, which if it holds, will be the highest rate since third quarter 2010. The index’s 12-month forward P/E ratio stood at 16.5, above the five-year average of 16.1 and above the ten-year average of 14.3. ArcelorMittal, Cognizant Technology and Valeant Pharmaceuticals impressed this week; Symantec, TiVo and Yelp disappointed.
- The Department of Labor reported that the Consumer Price Index rose 0.2% in April, for an annual rate of 2.5%, less than expected. The softer data tempered worries that the Federal Reserve would accelerate its pace of raising interest rates.
- The University of Michigan Index of Consumer Sentiment was unchanged for May vs. April at 98.8, still firmly in optimistic territory. The Current Economic Conditions Index fell 1.6 points to 113.3, while the Index of Consumer Expectations rose 1.1 points to 89.5. The report noted that the one-year inflation forecast increased 0.1 to 2.8%. Income expectations continued to fall. The report said fewer consumers anticipated further declines in the unemployment rate.
- The NFIB’s Small Business Optimism Index rose to 104.8 in April, marking its 17th consecutive month of historically high readings. Survey respondents cited the highest profit trends in the Index’s 45-year history, leading to higher capital expenditure plans but lower plans for job creation.
- The Job Openings and Labor Turnover Survey (JOLTS) reported that the number of job openings had increased to 6.6 million on the last business day of March, an openings rate of 4.2%. Hires and separations changed little, at 5.4 million and 5.3 million, respectively. The quits rate was relatively flat at 2.3%