Capital Market Implications for the Week of April 9 - 13, 2018
There were a number of inflation gauges reported last week, which (although firmer) continued to climb at a measured pace. Driven by a weak dollar, core PPI was higher than expected at an annual increase of 2.7% whilst core CPI for the last 12 months was inline. Real average hourly earnings were relatively unchanged from February to March and job openings in February were healthy. Recent trade tensions weighed on sentiment indexes and manufacturing releases; small business optimism fell in April from a 13-year high and this month’s Empire manufacturing report dropped precipitously. On the other hand, March retail sales were above expectations and homebuilder confidence remained high.
Although first-quarter earnings announcements commenced with mixed results last week, markets advanced for the second consecutive week. The S&P 500 Index rose 2.0% and the Dow Jones Industrial Average increased 1.8%. Energy stocks were last week’s strongest performers due to concerns with Syria (up 6%), while interest-rate sensitive sectors such as utilities and real estate lagged, off -1.3% and -1.1%, respectively. International markets were positive, with the MSCI EAFE Index gaining 1.5% and emerging markets ahead 0.7%. As bond prices declined but credit rallied last week, the bond market was mixed. The Barclays U.S. Aggregate Bond Index fell -0.2% for the week. U.S. corporates were relatively unchanged while ten-year municipal bonds increased slightly and high yield bonds gained 0.8%.
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