U.S. stocks had their first losing week in the past three weeks but were holding onto gains for April with one trading day left in the month.
Despite mostly positive corporate earnings reports last week, the Dow lost 0.6%, NASDAQ fell 0.4% and the S&P 500 had a fractional loss. So far this month, the S&P has the biggest gain, up 1.1% in price, while the Dow is up 0.9% and NASDAQ ahead by 0.8%. Foreign stocks were mostly higher last week and are solidly in the green for the month so far. Japan’s Nikkei 225 rose 1.4%, its fifth straight weekly gain, and is up 4.7% for April in local currency terms. Shanghai stocks were up modestly for the week but down 2.7% for the month, one of the few major global indexes in the red so far. The Stoxx Europe 600 is up 3.7% for April after rising 0.7% last week.
The Treasury’s 10-year note pierced through the psychologically important 3% mark last week but just as quickly retreated, ending the week largely unchanged. The benchmark note began the week at 2.96%, poised to break above 3% for the first time since January 2014, which it did on Tuesday, triggering a slight downturn in stocks. But after rising as high as 3.03% the following day buyers jumped in and drove the yield back down to Friday’s closing level of 2.96%, about where it started the week.
First quarter GDP came in lower than the previous quarter but ahead of expectations. The U.S. economy grew at an annual rate of 2.3%, down from the 2.9% pace in the fourth quarter of last year but beating the 2.0% consensus forecast and the fourth straight quarter of 2%+ growth. Weaker consumer spending was behind the dip. But consumers remained optimistic. The Conference Board’s consumer confidence index for April rose 1.7 points to 128.7 while the University of Michigan’s consumer sentiment index ended the month at 98.8, down a point from the previous month but ahead of forecasts; both indexes remain close to all-time highs. The durable goods orders report for March was a mixed bag. The headline number showed a 2.6% gain, soundly beating estimates of a 1.7% increase, but after excluding transportation, orders were flat; core capital goods, a proxy for business investment, fell 0.1%.
Housing reports for March were positive but the sector faces headwinds from higher prices and mortgage rates, which rose last week to their highest level in four years. Sales of existing homes, by far the largest category, rose 1.1% from the prior month to an annual rate of 5.6 million. Nevertheless, “sales are lagging year ago levels because supply is woefully low and home prices keep climbing above what some would-be buyers can afford,” said Lawrence Yun, the chief economist of the National Association of Realtors, which also reported that the median home price nationwide rose 5.8% versus a year ago to over $250,000. The S&P CoreLogic Case-Shiller national home price index showed a similar gain, rising 6.3% in February compared to a year earlier. Both indexes have now risen more than 70 consecutive months. New home sales rose 4.0% in March to an annual rate of 694,000 after rising 3.6% in February.
Reports/dates/facts/links worth paying attention to over the next week:
1. April 30: Personal income and outlays for March; pending home sales for March.
2. May 1: Institute for Supply Management manufacturing composite index for April; construction spending for March; auto sales for April; the Federal Open Market Committee begins a two-day meeting in Washington.
3. May 2: ADP national employment report for April; FOMC meeting ends at 2:00 P.M., followed by announcement.
4. May 3: Weekly unemployment claims; ISM nonmanufacturing index for April; factory orders for March.
5. May 4: Employment situation for April.