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Weekly Update – April 20, 2018

  • Stocks had a choppy week but posted modest gains as first-quarter earnings mostly met expectations. Oil inventories dwindled causing uneven price rises that briefly hit 40-month highs. Gold prices faltered, constrained by prospects of higher interest rates. Fears of higher inflation weakened U.S. Treasurys across the yield curve; the 10-year note hit a fouryear high of 2.96%.
  • With 17% of S&P 500 companies reporting first-quarter results, 80% have exceeded earnings per share (EPS) expectations, while 72% have beaten sales expectations. As of April 20, 2018, FactSet estimated the S&P 500 index’s first-quarter earnings growth rate at 18.3% and its 12-month forward P/E ratio at 16.6, above the fiveand ten-year averages of 16.1 and 14.3, respectively. Alcoa, Celanese and Netflix impressed this week; Adtran, Philip Morris and Pier 1 Imports disappointed.
  • Headline retail sales were up 0.6% in March vs. expectations of 0.4%. The increase followed three consecutive monthly declines of 0.1% each.
  • The Empire Manufacturing index fell to 15.8 in April from 22.5 in March, below 18.0 consensus. New orders and shipments slowed.
  • The Philadelphia Federal Reserve’s April Manufacturing Business Outlook suggested continued growth for regional manufacturing. General activity and employment improved slightly, whereas new orders and shipments moderated. The survey’s future indexes reflected continued optimism for the next six months.
  • U.S. industrial production increased 0.5% in March, beating its 0.4% estimate but down from February’s 1.0% reading. Factory output was up 0.1%, behind February’s 1.2%; still, consecutive quarterly growth from 4Q17 to 1Q18 hits its fastest pace in six years.
  • The NAHB Housing Market Index fell to 69 in April from 70 in March, below expectations. It was the lowest reading since November, as respondents noted tariffs on Canadian lumber and other imports were pressuring prices and hurting affordability. By contrast, U.S. housing starts exceeded expectations in March, rising to 1.32 million from 1.30 million in February.
  • The International Monetary Fund (IMF) reaffirmed its 2018-2019 global economic growth forecast of 3.9%. The IMF World Economic Outlook predicted that advanced economies would grow faster than potential through 2019, with fiscal policy driving the United States above full employment.

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