Market Update - Fourth Week Of April 2021
Stocks
Earnings reporting season is in full swing and (with 60% of the companies in the S&P 500 reporting actual first quarter results so far) 86% of S&P 500 companies have reported a positive earnings per share (EPS) surprise. The estimated earnings growth rate for this past quarter was 23.8% at the end of March, but the blend of actual earnings growth reported so far plus the estimates for those which have not yet reported is 45.8%.
The S&P 500 reached a record high last week, ending with a 0.04% gain. The Russell 2000 eased down 0.23% and the NASDAQ (having also reached a record high during the week) finished with a 0.38% decline. Overseas, international developed markets (MSCI EAFE) declined 0.74% and emerging markets (MSCI EM) weakened by 0.37%. Energy and communication services were the best performing sectors in the U.S. while technology and health care lagged.
Fixed Income
Interest rates rose as values fell, with the 10-year treasury yield rising 7 basis points to end the week at 1.65% after the strong GDP report (see below) and the Federal Reserve assured that they will respond with higher interest rates when inflation proves to be more than transitory.
Commodities
Oil prices rose last week on an improving outlook for global demand as the major economies appear to be in recovery mode from the pandemic. The price of West Texas crude rose 2.3% to $63.58 per barrel. However, there are still concerns over higher supply from OPEC+ after they decided to continue with their prior plan to boost supply slightly, beginning this week.
Economic Data
First quarter economic growth (GDP) in the U.S. was 6.4% on a quarter-over-quarter basis annualized, just a hair shy of the recent consensus estimate. Growth was led by a 10.7% increase in consumer spending and a 6.3% hike in government spending.
Personal income jumped 21.1% in March while consumer spending grew 4.2%, well ahead of the 1% spending decline in the prior month. The personal savings rate jumped to 27.6%, the highest in over 60 years. These growth rates were driven by government payments as a part of the COVID-19 relief efforts since the monies were distributed in March. Core inflation was 1.8% on a year-over-year basis.
The April survey of consumer sentiment was 88.3, a 3.4 point gain from March, showing continued monthly gains due to rising confidence in the momentum seen in jobs and incomes. This is due to record federal stimulus spending, both recently passed and proposed, as well as the positive impact from the rollout of COVID vaccinations.
Orders for long-lasting (durable) manufactured goods in the U.S. rebounded last month but grew slower than expected, weighed down by a global chip shortage and weaker demand for commercial aircraft.
Orders rose 0.5% versus February versus expectations of a 2.3% gain, but when transportation is excluded, orders rose 1.6% in line with the consensus estimate.
Source: Gradient Investments
The financial advisors of Copley Financial Group, Inc. will be updating you on a regular basis about the changes in the market. If you want to go over this in more detail, please contact me or your financial advisor, and we will be there for you. Here at Copley Financial Group, Inc. with offices in San Diego, CA. and Uniondale, NY. the team and myself will be with you in every step of this process.
