Markets were fairly quiet last week with a light economic calendar and holiday shortened trading week. Equity and bond markets were flossed Friday in observance of the Easter holiday. U.S. equities and commodities were both down slightly while bond markets moved sideways. With the S&P 500, up 16%, on pace for its best 4 month start in four decades, jobless claims are at their lowest levels since 1969, and a possibly decent Q1 GDP report this week, one may expect Fed narratives to become less dovish over the coming months.
- FactSet reported, with 15% of S&P 500 reporting, earnings growth is at -3.9%, an improvement from 4.3% rate last week. Revenue growth is clicking in at 5%.
- The divergence is performance between technology (+25%) and healthcare (-0.4%) ytd has been remarkable.
- The strong March retail sales release last week has economists revising Q1 GDP estimates higher. Atlanta GDPNow has moved up to 2.8% from below 1% as recently as early March.
- Manufacturing sector data has been mixed. 3m/3m manufacturing readings in last week’s industrial production report turned negative for the last time since October 2017.
- BLS weekly income data showed the same for Q1 as Q3 and Q4 – the first time we’ve had weekly pay unchanged for three consecutive quarters. That said, YoY growth ending Q4 was the best in a decade and the trend since 2014 has clearly been higher.
- The MBA mortgage home purchase applications report hit a nine year high.
- S. volatility adjusted high yield spreads are at their tightest levels for the past five years. High yield is off to its best start since 2009 and its fourth best ever.
- Aggregate credit in China rose by 11.6% or RMB 8.5t ($1.3t U.S.). Chinese credit stimulus is on. BCA noted the Chinese credit impulse tends to lead both mainland China and global manufacturing cycle by approximately 9 months.
- EM profit growth is contracting by 4% similar to the U.S. YoY profit cycle.
Economic Release Highlight
- March retail sales came in strong at 1.6%, beating expectations for 0.8%, posting the best reading since the GFC. The March result offsets the 1.6% surprise decline in December.
- March industrial production unexpectedly slipped 0.1% (0.3% gain expected). Business equipment was an incremental positive reading while consumer goods production missed.
- March housing starts and permits both missed expectations, reestablishing a downward trend. The starts report is the lowest since May 2017. YoY are -14.2% and -7.8% respectively.
- Flash PMI reveal some weakness in the services component, missing expectations (52.9 vs 55.0) while manufacturing component moved sideways.
- Conference Board LEI showed March leading indicators up 0.4%, now back at its highest reading since September 2018.
- Home builder optimism is growing as evidence by an encouraging reading in the Housing Market Index (63) which plummeted toward the end of last year and has been rebounding since.
- Q1 GDP in China registered 6.4%, the same as Q4. March Chinese industrial output moved to 8.5% growth from 5.3% range back in January/February and retail sales of 8.7% was higher than January/February level of 8.2%.