General market news
- Rates moved higher late on Friday, with the 10-year Treasury jumping to 2.56 percent; it also opened there Monday morning. Meanwhile, the 2-year opened at 2.40 percent and the 30-year opened at 2.97 percent. The short end of the curve remains inverted, as the 3-year is yielding 2.36 percent and the 3-month is yielding 2.37 percent.
- The S&P 500 and Nasdaq Composite were up modestly ahead of the start of earnings season. The Dow Jones remained flat on the week, as industrial names like Boeing (BA) and General Electric (GE) lagged. Bank earnings kicked off this season with Friday’s release of J.P. Morgan Chase (JPM) and Wells Fargo (WFC). J.P. Morgan was up 5.6 percent on the week as it continues to grow its balance sheet. But the same can’t be said about Wells Fargo, which was down 4.7 percent and continues to be clamped by regulators. In macro news, we saw stabilization in Chinese credit, supported by an increase in new bank loans.
- Financials, communication services, and technology were the top-performing sectors on the week. Health care, energy, and utilities were among the biggest laggards.
- On Wednesday, March’s Consumer Price Index showed 0.4-percent monthly growth, which contributed to inflation of 1.9 percent year-over-year. On Thursday, the Producer Price Index showed similar growth, with consumer inflation of 2.2 percent on a year-over-year basis.
- On Friday, the University of Michigan consumer sentiment survey declined from 98.4 to 96.9. A modest drop to 98.2 was expected, so this is a disappointing result.
|MSCI Emerging Markets||0.41%||3.00%||13.25%||–4.82%|
|Fixed Income Index||Month-to-Date||Year-to-Date||12-Month|
|U.S. Broad Market||–0.41%||2.52%||4.30%|
Source: Morningstar Direct
What to look forward to
This week is a busy one for economic data.
On Tuesday, we’ll see the industrial production report. It is expected to rebound from flat in February to a gain of 0.3 percent for March, largely on gains in utility production and possibly in oil production, as well as on higher prices. Manufacturing is also expected to improve, from a decline of 0.4 percent in February to a gain of 0.2 percent for March. Here, there is some downside risk on declines in hours worked in the sector. Although the expected rebound would be welcome, it would still leave both reports down over the past couple of months.
Also on Tuesday, the National Association of Home Builders industry survey will be released. It is expected to rise from 62 in March to 64 for April, reflecting rising confidence in the homebuilding market. With interest rates declining, affordability has improved, which would make such an improvement reasonable.
On Wednesday, the international trade report is expected to show the trade deficit worsening slightly, going from $51.1 billion in January (which was a sharp drop over December) to $53.6 billion for February. Despite the small move, this result would still be better than recent figures. Further, it would help first-quarter growth, or at least act as less of a headwind than expected.
On Thursday, the retail sales report will be released. The headline index is expected to rise sharply, from a 0.2-percent decline for February to a 0.8-percent gain for March, on a rebound in auto sales and higher gasoline prices. The core index, which excludes autos, is also expected to bounce, from a 0.4-percent drop in February to a 0.7-percent gain in March. If the numbers come in as expected, it would take the short-term trend back into positive territory but would still be weak by recent standards. Even with the rebound, the data suggests we may well see slower growth in the first quarter.
Finally, on Friday, the housing starts report is expected to show improvement, with an increase from 1.16 million in February to 1.23 million for March on an annualized basis. Such an improvement would indicate the housing market is stabilizing after a slowdown, which again would be consistent with the rise in affordability and be a positive economic indicator.