Last Week
The market rebound continued for the third straight week, erasing almost all of April’s losses. Earnings season provided reason for optimism, as composite growth for the first quarter increased to +5.4% from +5.0% the previous week and the estimate of +3.4% at the end of March. We are generally seeing companies whose sales require long-term financing for sales, such as capital equipment companies, reporting lagging earnings reports; in contrast, businesses with sales less dependent on long-term financing are reporting leading earnings reports. The rally was also driven by renewed confidence that 2024 Fed interest rate cuts were more likely, given a spike in weekly initial jobless claims on Thursday and a sharp drop in consumer confidence on Friday. In other words, the glass was half full as stocks traded higher after both good news and bad news.
Every industry sector finished positive, with Utilities and Financials leading the pack, while Consumer Goods barely eked out a gain. The S&P 500 jumped 1.9%, the Nasdaq Composite rose 1.1% and the Russell 2000 added 1.2%. Gold rallied +3%, Crude was flat, and advancing issues outnumbered declining issues by almost a ratio of 2-1. The bond market was relatively quiet, with the yield on the 10-year Treasury finishing at the same level as the previous Friday at 4.5%, despite ticking up five basis points on Friday after the University of Michigan report indicated that consumer’s inflationary expectations had risen from the previous month.
There is not much to report on the Chicago sports scene, although the White Sox have won 6 of their last 10 games and no longer have the worst record in baseball!
This Week
The key economic releases will be the U.S. retail sales and consumer price index (CPI) reports on Wednesday. The health of U.S. retailers will also be in focus as Walmart and Home Depot are scheduled to report quarterly earnings.
According to the consensus estimate, the Consumer Price Index likely rose 3.4% over the year in April, down from a 3.5% increase in March. Any variance from that estimate will generate significant trading activity in the stock and bond markets.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvestfunds.com.