U.S. equity snapped an eight-week losing streak last week. The major indices all rallied well above of 6%. Strong corporate earnings results and economic data boosted optimism among investors for most of last week’s trading.
There was much for investors to cheer as 77% of S&P 500 companies reporting results have beaten analyst’s estimates. Over all, earnings grew by 9%. While that figure is the lowest since the fourth quarter of 2000, it is still an expansion.
Surprisingly, several retailers reported strong results. This may have helped allay investor’s fears as Amazon, Walmart and Target reported dismal results a couple of weeks ago. Last week, Dollar Tree, Ross Stores and Ulta Beauty all posted impressive numbers as consumers boosted spending.
Perhaps the most important news last week came from the Fed. Consumer prices rose 6.3% in April, down from 6.6% in March. The chart below from the Commerce Department is a little difficult to read, but you can see at the far right, the lines have peaked and started dropping slightly.
Investors were also relieved by the minutes from the Fed’s May 2-3 meeting. They showed the central bank discussed raising interest rates sharply, in the 0.5% range, to deliberately slow growth enough to bring down inflation. When the minutes were released on Wednesday, the market began its rally. The Fed is expected to raise rates in both June and July by 0.5%.
No one knows for sure if the worst is behind us, but the economy is still showing strength and the consumer still working and spending. As long as this continues, I’ll have faith in the U.S. markets. If you have any questions, please contact me.
The Markets and Economy
- Americans are keeping their cars longer. The average age of a vehicle on the S. roadways hit a record 12.2 years in 2021. This is the fifth consecutive year the average age of used vehicles have increased.
- 47% of the world’s production of sunflower oil, a commodity commonly used in cooking, comes from the Ukraine. According to the S. Agriculture Dept., shipments of cooking oils as well as grains such as wheat have been dramatically affected by the war in Ukraine.
- S. households boosted spending for a fourth-straight month in April. However, the savings rate fell to its lowest rate in 14 years suggesting many Americans are tapping savings to offset price increases due to inflation.
- After peaking around 5.5%, S. mortgage rates have drifted lower. The 30-year fixed mortgage rate closed last week at 5.1%.
- S. retailers are changing their product offerings based on shifting consumer preferences. Inflation is causing grocers to offer more half-gallon milk than the larger size and promote soap dispensers that help consumers get every drop of detergent they pay for. Some manufacturers are also reducing the size of their products to prevent price increases.
- Western corporations are citing the “China drag” for reduced revenue during the last few months. Due to a spike in Covid cases, Shanghai’s citizens are in lock down mode. It’s not only affecting other cities in China, but also foreign businesses as the population is quarantined.
- The median sales price of existing homes sold nationwide in April 2022 was $391,200. That was the highest level recorded in S. history on both a nominal and inflation-adjusted basis.
- America’s seaports are stretched to their limit just as retailers and manufacturers are set to begin their seasonal rush of importing ahead of the fall and holiday shopping season.
- Mortgage refinancing makes up the bulk of loan originations. It has been especially strong during the pandemic as homeowners refinanced at lower rates. Now, with interest rates rising, mortgage lenders are seeing a significant drag on their business.
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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
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Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors, LLC.