It was a relatively uneventful week with GoT, the Masters, and taxes on most people's minds leading into the weekend. However, an encouraging beginning to earnings season, relatively comforting Brexit developments, and positive data points on credit growth quietly led the S&P 500 to a third consecutive week of gains and now less than 1% below its all-time record high. Rates, oil ($63.89) and commodities continued their march higher on a less dire growth consensus looking forward.
- FOMC minutes revealed a slight bias for a rate hike over a cut in 2019 with the majority preferring no change. It also highlighted the beginning of the end of quantitative tightening. The Fed balance sheet is $3.937b, down $523.6b since QT’s inception in October 2017.
- March YoY yuan loan growth in China was +13.7%. March CNY 1,690b is up sharply from February CNY 885.8b. • The EU voted to extend Brexit “only as long as necessary”, no longer than October 31st. Also, the UK must hold elections on May 23rd for the European Parliament. If they do not, they will ‘hard exit’ the EU on June 1st. Eurozone equities charged to YTD highs.
- The ECB left its main policy levers unchanged last week with the refi rate at 0% and deposit rate at 0.40% along with a pledge to keep rates on hold at least through 2019 and QE reinvestment beyond the initial rate hike.
- February EZ industrial production was weak (-0.3% vs -1.0%) but significantly beat expectations.
- After declining 44% from high to low in Q418, oil has now rallied nearly 50%. Accordingly, gas prices have increased for 50 consecutive days - the longest streak since at least 2004, now up over 22% on the year.
- Atlanta Fed GDPNow Q1 QoQ GDP estimate bottomed at 0.17% in March but has since surged to 2.27% - on track for the largest improvement (first to final estimate) since 2011.
- After a pause in March, U.S. equity markets have started to see strength in the final hour of trading - a positive last hour in 9 of 10 days in April.
- From a sector standpoint, technology (+23.5%) is vastly outperforming while health care (+4.2%) is the laggard. Homebuilders at six months high as well.
- ICI reported significant equity and high yield fund outflows last week - generally a constructive sign for forward equity market returns.
Economic Release Highlights
- Both job growth and job openings slowed sharply in the March JOLTS report. The spread between openings and hires narrowed 400,000 to 1.391mm and the quit rate held steady.
- March headline and core CPI came in at 1.9% and 2.0% respectively. Energy and housing costs were the positive drivers while apparel, communications, and vehicles were dampeners.
- Jobless claims (196k) and its 4-week average both hit new cycle lows last week.
- Preliminary April UofM consumer sentiment dipped to 96.9, missing expectations. Expectations softened as did expectations for inflation while current conditions remained robust at 114.2.
- NFIB small business confidence at 101.8 held steady in March.