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Weekly Update

Market Summary

Equity markets broadly moved sideways in a holiday-shortened trading week that was mostly absent of any notable directional drivers outside of a stream of first quarter corporate earnings reports. For the week, the S&P 500 closed -0.7% lower, while the Dow Jones and NASDAQ gained 0.60% and 0.17%, respectively. The health care sector was the biggest drag on equity returns as proposed health care legislation including universal health coverage and potential regulations on transparency sent S&P health care stocks tumbling down -4.4% on average for the week.

Despite headwinds from the health care sector, better than expected earnings reports helped boost cyclical sectors to positive returns for the week. According to FactSet, of the 82 S&P 500 constituents that have reported earnings so far, 76% have come in above earnings expectations, while only about half have beaten sales forecasts. Analysts have set a low bar for the first quarter with a consensus forecast of -3.7% earnings growth for the S&P 500 compared to the first quarter of 2018, citing slowing global growth, geopolitical tensions, and rising wages and energy prices that may begin to cut into corporate profit margins.

Oil prices, which have climbed over 41% year-to-date reversing much of last year’s drop, are poised to rise even further this week as the White House has announced that it will no longer grant sanctions waivers to countries that currently import Iranian crude oil, thereby putting a further strain on supply.

Additionally in the week ahead, market participants will be in for a deluge of corporate earnings reports with over a quarter of S&P 500 companies announcing results, and the week will be topped off with the first preliminary reading of first quarter U.S. GDP growth.

Economic Highlights:

Manufacturing: U.S. manufacturing data disappointed last week with industrial production continuing to lag, slipping -0.1% from February to March versus expectations for 0.2% growth.

Retail Sales: March retail sales surprised to the upside, rising 1.6% in March compared to estimates of 1.0% growth, and rebounding from February’s -0.2% contraction. The strength was broad based with 12 of 13 retail categories beating expectations.

US Economy – The Week Ahead

Tuesday, 4/23/2019

  • New Home Sales – Consensus Estimate: 649K (-2.7% MoM), Prior Month: 667K (4.9% MoM)

Wednesday, 4/24/2019

  • No Data

Thursday, 4/25/2019

  • Initial Jobless Claims – Consensus Estimate: 200,000 (4.2% WoW), Prior Week: 192,000 (-2.5% WoW)
  • Durable Goods Orders Month-over-Month Growth (Preliminary) – Consensus Estimate: 0.8%, Prior Month: -1.6%

Friday, 4/26/2019

  • U.S. First Quarter 2019 GDP Growth Year-over-Year (First Preliminary) – Consensus Estimate: 2.8% (2.0% QoQ), Prior Quarter: 3.0% (2.2% QoQ)
  • University of Michigan Consumer Sentiment Survey (Final) – Consensus Estimate: 97.0 (-1.4% MoM), Prior Month: 98.4 (4.9% MoM)
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