The Markets in April

The Markets in April

April was marked by the threatened tariff war between the United States and China. Tensions between the world’s two largest economies certainly impacted stocks both home and abroad. Escalating strife in Syria gave additional reason for concern. However, surging energy stocks lifted the market as crude oil prices approached $70 per barrel for the first time in almost three years. Talks between North and South Korea added to sentiment on the positive side. By the close of April, the dollar reached its highest level since January, while yields on 10-year Treasuries closed in on 3.0% for the first time since 2014 — signs that the world views U.S. economic growth as on the rise.

With all of the upheaval of news, both positive and negative, it’s not surprising that equities closed April about where they began. Each of the benchmark indexes posted meager positive monthly gains over their March closing values. The Global Dow had the best month, the only index to post a gain of more than 1.0%. The Russell 2000 gained a little less than 1.0%, while the large caps of the Dow and S&P 500 crept up about 0.25%, respectively. The Nasdaq had the smallest gain; however, it leads year-to-date.

At the close on April 30, the price of crude oil was $68.57 per barrel, up from $64.91 per barrel on March 29. The national average retail regular gasoline price was $2.80 per gallon on April 23, down from the March 26 selling price of $2.65. The price of gold decreased, closing at $1,316.10 on the last trading day of April, down from $1,329.60 at the end of March.

Economic News

  • Employment: Total employment rose by 103,000 in March following February’s revised total of 326,000 new jobs. Employment gains occurred in healthcare, mining, and manufacturing. The unemployment rate remained at 4.1%, with roughly 6.6 million eligible workers unemployed. The labor participation rate was stable at 62.9%. The average workweek was unchanged at 34.5 hours for the month. Average hourly earnings increased by $0.08 to $26.82. Over the last 12 months, average hourly earnings have risen $0.71, or 2.7%.
  • FOMC/interest rates: The Federal Open Market Committee did not meet in April. Its next scheduled meeting is during the first week of May.
  • GDP/budget: The initial estimate of 1Q gross domestic product showed expansion at an annual rate of 2.3%, according to the Bureau of Economic Analysis. The 2017 4Q GDP grew at an annualized rate of 2.9%. Consumer spending rose 1.1% in 1Q. Spending on durable goods, which had increased 13.7% in 4Q 2017, dropped 3.3% in 1Q. The government deficit was $208.74 billion in March, compared to February’s deficit of $215.25 billion. The fiscal 2018 deficit (which began in October 2017) amounts to $599.71 billion — an increase of $72.85 billion, or 13.8% more than the deficit in the same period last year.
  • Inflation/consumer spending: Inflationary pressures continued in March. The personal consumption expenditures (PCE) price index (a measure of what consumers pay for goods and services) ticked up 0.4% in March following a February gain of 0.2%. The core PCE price index (excluding energy and food) also jumped ahead 0.2% in March. Both personal (pre-tax) income and disposable personal (after-tax) income climbed 0.3%, respectively, over the prior month. Personal consumption expenditures (the value of the goods and services purchased by consumers) climbed 0.4% in March.
  • The Consumer Price Index dropped 0.1% in March after climbing 0.2% in February. Over the last 12 months ended in March, consumer prices are up 2.4%. Core prices, which exclude food and energy, are up 2.1% for the year.
  • Wholesale prices also increased in March. The Producer Price Index showed that the prices companies receive for goods and services jumped 0.3% in March. Year-over-year, producer prices have increased 2.7%.
  • Housing: Home sales improved in March. Total existing-home sales climbed 1.1% for the month following a 3.0% gain in February. However, year-over-year, existing home sales are down 1.2%. The March median price for existing homes was $250,400, which is 5.8% higher than the March 2017 price of $236,600. Inventory of existing homes for sale rose 5.7%. New home sales rebounded in March following a dip in February. The Census Bureau’s latest report reveals sales of new single-family homes increased 4.0% in March.
  • Manufacturing: Industrial production edged up 0.5% in March after increasing 1.0% in February. Manufacturing output rose 0.1% for the month, after climbing 1.5% in February. Total industrial production was 4.3% higher in March than it was a year earlier. Capacity utilization for the industrial sector moved up 0.3 percentage point in March following a 0.7 percentage point increase in February. New orders for manufactured durable goods climbed 2.6% in March following a 3.5% rise in February. For the year, new durable goods orders are up 8.7%.
  • Imports and exports: The advance report on international trade in goods revealed that the trade gap decreased by $7.8 billion in March from February. The deficit for March was $68.0 billion, with exports of goods climbing 2.5%, while imports decreased 2.1% in March compared to February. For the month, total imports ($208.1 billion) far exceeded exports ($140.1 billion). Import prices were flat in March after increasing 0.3% in February. For the year, import prices have increased 3.6%. Prices for exports rose 0.3% in March and are up 3.4% for the year.
  • International markets: Trade tensions between the United States and China continued to loom in May, although both sides say they are trying to reach a compromise over their mutual tariff threats. However, some experts see the spat between the two economic giants as direct impacting global economic growth. The European Central Bank left its monetary policy in place, leaving lending rates at their March 2016 levels. European corporate earnings reports for the first quarter were mixed. Data from the United Kingdom’s Office of National Statistics showed the British economy expanded a disappointing 0.1% in the first quarter of 2018. The Bank of Japan maintained its short-term interest rates at -0.1% while continuing the bank’s commitment to maintain the current monetary base until the core consumer price index reaches an inflation target of 2.0%.
  • Consumer confidence: Consumer confidence, as measured by The Conference Board Consumer Confidence Index®, increased in April following a decrease in March. The index sits at 128.7, up from 127.0 in March. Consumer sentiment improved relative to the current economy, and expectations for future economic growth also improved.

The Month Ahead

We could see more market volatility in May as the rocky political climate, both home and abroad, drives investor behavior. The month starts off with the Federal Open Market Committee meeting. Another interest rate hike (largely seen as unlikely this month) could add to investor uneasiness, although such a move could be a sign of continued economic strengthening.

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/ Market Data (oil spot price, WTI Cushing, OK); (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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