The Markets in April

The Markets in April

As April came to a close, major benchmark indexes posted strong returns. Both the Nasdaq and S&P 500 reached new highs during the month, amid a shrinking trade deficit, favorable economic projections, low inflation, and stable interest rates. The Nasdaq led the way, nearing a monthly gain of almost 5.0%, followed by the large caps of the S&P 500, the small caps of the Russell 2000, the Global Dow, and the Dow, which gained over 2.5% for the month. In April, consumers saw gas prices climb as oil prices continued to soar.

At the close on April 30, the price of crude oil was $63.42 per barrel, up from the March 29 price of $60.19 per barrel. The national average retail regular gasoline price was $2.89 per gallon on April 29, up from the March 25 selling price of $2.62, and $0.04 more than a year ago. The price of gold dipped by the end of April, falling to $1,285.10 on the 30th, down from $1,325.70 at the end of March.

Latest Economic Reports

  • Employment: Total employment rose by 263,000 in April, after adding 196,000 in March. The unemployment rate declined to 3.6%. Notable job gains occurred in professional and business services, construction, health care, and social assistance.
  • FOMC/interest rates: The Federal Open Market Committee met in April and left interest rates unchanged. S. central bank voted unanimously to maintain its benchmark interest rate in a range of 2.25% and 2.5%. Inflation was perceived as less of a threat than expected earlier.
  • GDP/budget: The initial estimate of Q1 gross domestic product showed the economy grew at an annualized rate of 3.2%. GDP expanded at 2.2% for Q4 2018. Driving the growth rate increase was growth in business investment and in exports, and a decrease in imports. On the other hand, consumer spending, as measured by personal consumption expenditures, rose 1.2% — notably down from the Q4 rate of 2.5%. Also of note, business investment increased 2.7% and government purchases were a strong 2.4%. The federal budget deficit was $147 billion in March and sits at $691 billion through the first six months of the fiscal year. Over the same period for fiscal 2018, the deficit was $600 billion.
  • Inflation/consumer spending: The report on personal income and outlays is favored by the Federal Reserve as an inflation indicator. The prices consumers paid for goods and services climbed 0.2% in March following a 0.1% gain in February. Excluding food and energy, consumer prices were unchanged in March after nudging up 0.1% the prior month. In March, consumer spending rose 0.9% (0.1% in February). Personal income inched up 0.1% in March after increasing 0.2% in February. Disposable (after-tax) income did not change in March after climbing 0.1% in February.
  • The Consumer Price Index increased 0.4% in March after rising 0.2% in February. Over the previous 12 months ended in March, the CPI rose 1.9%. The energy index increased 3.5% in March, accounting for about 60% of the overall monthly increase. Core prices, which exclude food and energy, climbed 0.1% in March, the same increase as in February. Core prices were up 2.0% over the previous 12 months ended in March.
  • According to the Producer Price Index, the prices companies received for goods and services rose 0.6% in March after climbing 0.1% in February. The index increased 2.2% for the 12 months ended in March, the largest 12-month rise since a 2.5% advance in December 2018. Once again, soaring energy prices drove the PPI. Excluding food, energy, and trade services, producer prices were unchanged in March from February.
  • Housing: While new home sales expanded, the market has been slower for existing home sales, which fell 4.9% in March after climbing 11.8% in February. Year-over-year, existing home sales remain down 5.4%. The March median price for existing homes was $259,400, up from $249,500 the prior month. Existing home prices were up 3.8% from March 2018. Total housing inventory for existing homes for sale in March increased to 1.68 million (3.9-month supply), up from 1.63 million existing homes available for sale in February. Sales of new homes continued to expand in March following a robust February. Sales of new single-family houses in March were 4.5% higher than in February, and 3.0% above the March 2018 estimate. Falling prices and a few more houses on the market have helped drive sales activity. The median sales price of new houses sold in March was $302,700 ($315,200 in February). The average sales price was $376,000 ($385,300 in February). Inventory was at a supply of 6.0 months in March (6.1 months in February).
  • Manufacturing: The manufacturing sector continued to sputter in March, as industrial production edged down 0.1% after inching up 0.1% in February. Manufacturing production was unchanged in March after declining in both January and February. Total industrial production was 2.8% higher in March than it was a year earlier. On a more positive note, durable goods orders increased 2.7% in March after falling 1.1% (revised) in February. Soaring commercial aircraft and motor vehicle orders drove much of the March gain. New orders for durable goods excluding transportation increased 0.4% in March.
  • Imports and exports:The latest information on international trade in goods and services, out April 17, is for February and shows that the trade deficit continues to shrink. For February, the goods and services deficit was $49.4 billion, down $1.8 billion from January’s figures, which were $8.8 billion lower than the prior month. February exports were up 1.1%, while imports rose only 0.2%.
  • International markets: Canada’s GDP fell 0.1% in February from the previous month, and is up 1.1% since February 2018. In light of this news, the Bank of Canada is expected to keep interest rates at their current level for what could be an extended period of time. Business surveys in China were not as positive as hoped for last month. Despite Beijing’s efforts to stimulate economic growth, manufacturing growth has been slower than anticipated. Eurozone inflation has been subdued for quite some time. However, Germany’s annual inflation rate, which grew to 2.1% in April, exceeded the European Central Bank’s target level. British Prime Minister Theresa May’s attempts to negotiate a Brexit deal with the Labour Party has not been fruitful so far. Presuming a stalemate with no internal agreement in place, Britain is likely to take part in next month’s European elections.
  • Consumer confidence: The Conference Board Consumer Confidence Index® jumped from 124.2 in March to 129.2 in April. Consumers’ opinion of current economic conditions improved in April, as did their short-term outlook. Overall, consumers expect the economy to continue to grow at a solid pace into the summer months.

The Month Ahead

The economy grew more than 3.0% in the first quarter, according to the initial estimate of the GDP. May’s GDP report will have more complete information and may show that growth was not quite so robust, as consumer spending appears to be slowing. Nevertheless, the markets could get a boost if exports continue to outpace imports and progress is made toward a trade resolution with China.

 

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.

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