The Data
Equities bounced back last week for their best 5-day period of 2024.
S&P 500 +2.65% Dow +0.67% Russell 2000 +2.70%, Nasdaq +4.23%.[1]
The All-Country World Index rose +2.57%.1
S&P 500 sub-sectors were higher last week.
Tech & Consumer Discretionary led to the upside with gains over 3.5%.1
Healthcare, Energy, & Materials were positive but gained less than 1%.1
The CBOE Volatility Index (VIX) got crushed lower by 20% to end at 15.1
US Treasury bond yields rose on the long end of the curve last week.
US 2yr -0.01% at 4.96%, 10yr +0.05% to 4.67%, 30yr +0.06% to 4.78%.1
Fresh inflation data seemed to cement the Fed keeping rates higher vs cutting.
Commodities as an aggregate asset class moved higherer last week.
WTI Crude gained +0.63%.1
Gold declined -2.31%.1
The US Dollar index was flat.1
In our opinion, U.S. economic data was mixed last week.
Durable goods orders surprised to the upside with a sizable gain.1
US GDP came in lower than expected at +1.6%.1
Jobless claims came in lower than expected while personal income rose for the month.1
An index of equities outside the US (FTSE All-World ex-US) gained +2.48%.1
Conclusion
Equities had their best week of 2024 last week as corporate earnings season is halfway through.
The Nasdaq led major indices to the upside with a gain of +4.23%.1
Earnings from heavyweight Tech companies seemed to show that their spending on AI & cloud computing is paying off.
So far in 2024, the S&P 500 has outperformed the small-cap Russell 2000 by over 3%.
The ratio between these 2 asset classes is bumping up against the all-time highs hit during the Covid period.1
We believe this could show that the “higher for longer” dynamic with interest rates has been fully priced in as smaller companies are more sensitive to borrowing costs. This this earnings cycle resembles the last one — with the chatter around artificial intelligence and the focus on sticky inflation and corporate margins, yet the backdrop has morphed.
Geopolitical tension and fading hopes for Federal Reserve interest-rate cuts have helped drive the S&P 500 down almost 3% this month.
Yet, in the face of that, Corporate America has offered crucial support for the market. With the quarterly reporting season roughly half over, US corporate earnings have largely lived up to Wall Street’s optimistic expectations even as macroeconomic headwinds linger.
81% of reporting companies have delivered upside surprises thus far. 1
If this holds, it would easily beat the 10-year average of 75%.1
This has been helped by consumer prices growing more quickly than producer prices in recent quarters. 1
This has helped support a recovery in S&P 500 margins amid corporate cost-cutting that’s also helped drive profits higher.
S&P 500 subsectors were all higher.
Recent underperformers led to the upside as Tech earnings boosted the sector.
Financials were one of the poorer performers last week as earnings have been mixed. 1
Over the coming months, loan growth is expected to remain muted as analysts expect banks’ earnings per share to contract by 6% since last year.1
US Treasuries saw the yield curve steepen as the 2yr declined slightly while the 10/30yr rose.1
The Fed’s preferred gauge of underlying inflation climbed 0.3% in March and 2.8% from a year earlier, the same as the prior month. 1
The 3 straight months of inflation data indicating progress toward the central bank’s 2% goal has stalled, and suggest the first interest-rate cut is getting pushed further out.
Gov’t data on Friday underscored the strength of the US economy as inflation-adjusted consumer spending grew 0.5% for a 2nd straight month in March, matching the strongest advance since the start of 2023. 1
Justin Greenhill - Chief Investment Officer – justin@sollinda.com
Ryan A. Mumy, CFP®, AIF® - CEO – ryan@sollinda.com
Phone: 844/662-1211
[1] Source: Bloomberg – 4/26/2024