Hope you are all doing well. The Dow finished April 2.5% higher, its best monthly showing since January. The S&P 500 logged a 1.5% monthly gain, its second positive month in a row. The Nasdaq which has been the best performer this year ended the month only slightly higher. For the week, the Nasdaq saw the largest gain, at 1.3%, in what was considered Big Tech’s marquee earnings week. The Dow and S&P 500 each finished the week about 0.9% higher. Jerry Springer passed away this week so I have broken down this week’s update using two of his more iconic episodes.
The Guy Who Married A Horse
Earnings season has revealed a lot about the US consumer. Ok maybe not as big as the Springer show reveal Mark’s wife Pixel that the neighbor is not getting along with is a horse. It was however an important week of corporate earnings announcements with Alphabet, Microsoft, Meta and Amazon all posting results that beat expectations. The markets are getting a boost from the better than feared results. With roughly half of S&P 500 companies having reported quarterly results, earnings for the period are down 1.7%, while revenues are up 4% versus the same quarter a year ago. Most importantly what the results tell you people are still spending. The revenue growth is indicative of a high level of ongoing demand. Profits stay under pressure from higher expenses, mostly from wage growth as companies are paying more to recruit and retain employees. Strong earnings won’t prevent the market from experiencing bouts of volatility. Recessionary evidence continues to mount. Although, I don’t think the looming recession will take us back down to the October lows. Even if we give back some of the gains made this year I believe the markets will, at some point this year, turn the corner and the new bull market will begin. I think the Fed will pause with the rate hikes in the next two months and the markets will start to focus more on economic recovery than recession.
Kung Fu Hillbilly Fights His Roomate
The Federal Reserve like the Kung Fu Hillbilly in the fight is trying to karate chop down inflation. The Fed was able to take inflation’s temperature one last time on Friday before the May meeting of the Federal Open Market Committee. The personal consumption expenditure index rose 4.2% in March from one year ago, slowing from a 5.1% annual increase in February. Excluding food and energy prices, the core PCE was up 4.6% compared with expectations for a 4.5% rise. Core PCE is the Fed’s preferred gauge of inflation and I continue to believe the Fed views the current level of inflation as too high. I feel they will raise rates at this upcoming meeting and possibly at the June meeting as well.