Global stock markets delivered mixed results for the week. U.S. indexes mostly gained on the holiday-shortened week, but small caps lagged. Trading action was generally macro-driven, supported by a dovish Federal Reserve, expectations for a U.S.-China trade deal and signs of global growth bottoming. Headwinds included an earnings slowdown, lingering trade tensions and a fragile China recovery.
Oil prices rose slightly on the week, whereas gold prices fell. Interest rates were volatile across the U.S. Treasury yield curve, but settled near where they started: the 10-year yield was flat at about 2.56%. The U.S. dollar posted significant gains against a basket of major currencies.
With 15% of S&P 500 companies reporting first-quarter results, 78% have exceeded earnings per share (EPS) expectations, while 53% have beaten sales expectations. As of April 18, 2019, FactSet estimated the S&P 500 index’s first-quarter earnings growth rate at -3.9% and its 12-month forward P/E ratio at 16.8, above both the five-year average of 16.4 and the ten-year average of 14.7. CSX, Morgan Stanley and PepsiCo impressed this week, whereas Bank of New York Mellon, Netflix and Shake Shack disappointed. Next week, 150 S&P 500 companies report 1Q19 results.
March retail sales were up 1.6% (est. 1.0%) from February’s 0.2% contraction. Sales ex-autos of 1.2% beat the 0.7% consensus. Control group sales of 1.0% (est. 0.5%) reversed February’s -0.3% print. Twelve of 13 retail categories beat; auto sales rose by the most in 18 months.
Industrial production declined 0.1% in March following a 0.1% increase in February. Mining output was the big drag. Manufacturing production was unchanged following declines in January and February. Goldman Sachs pointed out that the capex sensitive business category rebounded, increasing 0.4% after a 0.8% decline in February.
April IHS Markit flash U.S. manufacturing PMI was unchanged at 52.4. Inflationary pressure was the weakest since July 2017. Flash services PMI was down 2.4 points to 52.8, a 31-month low. Business activity also fell to a 25-month low.
The NAHB housing market index pushed up to 63 in April from 62 last month, marking a six-month high. Builders highlighted solid demand for single-family homes.