A strong final week of the month pushed U.S. stocks into the green for April, boosted by big gains in tech stocks and the unveiling of President Trump’s tax reform proposal featuring big cuts in personal and corporate tax rates.
NASDAQ led the way with a 2.3% gain, ending the week above the 6000 mark for the first time ever, boosted by tech giants like Microsoft, Alphabet, Amazon and Apple. It was up 2.3% for the month as well and is up 12.7% year to date. The Dow, which includes Microsoft and Apple among its components, gained 1.9% for the week, boosting its April gain to 1.3% in price and an even 6% for the year. The S&P 500 rose 1.5% to raise its monthly gain to 0.9% and 6.5% in price YTD. Bond prices were lower for the week, raising yields by 4-5 basis points on the long end, although they are higher for the month and year.
European stocks were up sharply last week, buoyed by the French election results and the European Central Bank’s inaction. The Stoxx Europe 600 was up 2.4% for the week, boosted by a 4% gain in French stocks. In the first round of the French presidential election, National Front candidate Marine LePen, who wants France to drop out of the European Union and return to the franc, came in second but faces steep odds in the final round against the more moderate Emmanuel Macron. The ECB kept interest rates unchanged and said it would maintain its massive asset-purchase program. The euro was up 1.6% for the week. Japanese stocks rose 3.1% as the Bank of Japan also made no changes to its monetary policies. Japanese stocks have generally underperformed the major international indexes this year but have gained nearly 5% over the past two weeks.
The final week of the month brought a wealth of U.S. economic reports, many of which showed a slowing economy. The first estimate of GDP growth for the first quarter came in much lower than expected at an annualized 0.7%, the slowest rate in three years and well below the previous quarter’s 2.1% pace. A big reason for the weakness was consumer spending, which rose at only a 0.3% clip, the weakest rate since the fourth quarter of 2009. The Chicago Fed’s national activity index fell in March but remained in positive territory at 0.08. Durable goods orders rose 0.7%, skewed by a 26% increase in civilian aircraft orders; otherwise orders ex-transportation fell 0.2%. Core capital goods, which measure business spending on new equipment, rose a weaker than expected 0.4%.
Housing sector indicators were mixed. Purchases of newly-built single-family homes rose 5.8% to an annual rate of 621,000, well above expectations, but part of that may have been due to moderation in pricing by home builders. Pending sales of existing homes fell 0.8% after rising 5.5% in February, which may be due to higher home prices. Indeed, housing market observers are starting to worry that the surge in prices may not end well. The S&P CoreLogic Case-Shiller 20-city home price index rose another 0.7% in February, nearly 6% higher than the year-earlier figure. Consumer confidence moderated. The Conference Board’s consumer confidence index fell to 120.3 in April from a downwardly revised 124.9 reading in March, but remained near a post-recession high. Likewise, the University of Michigan’s consumer sentiment index ended April at 97.0, down a full point from the prior month’s reading.
Reports/dates/facts/links worth paying attention to over the next week:
1. May 1: Personal income and outlays for March; construction spending for March; ISM manufacturing composite index for April.
2. May 2: Motor vehicle sales for April; the Federal Open Market Committee meeting opens in Washington, D.C.
3. May 3: ADP national employment report for April; ISM non-manufacturing composite index for April; FOMC meeting ends, followed by announcement at 2:00 P.M. EST.
4. May 4: Weekly unemployment claims; factory orders for March.
5. May 5: Employment situation for April.