U.S. equity markets posted modest gains in a week driven by technology and financial stocks and an appetite for risk. Interest rates across the yield curve shifted higher in response to moderately encouraging economic data, corporate earnings, and hopeful political news coming out of Europe. International stocks again outpaced their U.S. counterparts. Commodities drifted lower on the heels of oil prices falling further to $46.25.

Your Weekly Anecdotes:

  • Market catastrophe averted. Emmanuel Macron, the unabashed pro-EU/centrist candidate triumphed over Marine Le Pen, the anti-EU/nationalist candidate, in the widely-publicized French presidential election on Sunday. Risk markets are relieved.
  • The FOMC met last week, held steady on rates as expected, and released a relatively encouraging view of the world. They noted soft Q1 consumer spending as transitory, firm business spending, and no concerns surrounding recent softening in core PCE (inflation) data.
  • An interesting observation on the corporate earnings season is the hugely positive 65.3% beat rate in revenues thus far. The numbers are suggesting this will be the first time the revenue beat rate is higher than the earnings beat rate since Q2 2014. It is much harder for companies to beat revenue expectations than earnings, which management can ‘manage.’ Upside revenue results are bullish for corporate America.
  • The encouraging April jobs number released on Friday confirms a continued healthy labor market and bodes well for forward looking consumer spending expectations.
  • Market volatility dropped to extraordinarily low levels this week. The VIX dropped below 10, marking the 20th day since 1992 that we’ve seen a single digit reading.
  • The strong export sub-component of the April ISM surveys confirms constructive views on non-U.S. economies. The 59.5 reading on manufacturing exports is the highest since April 2011 and the 65.5 reading on non-manufacturing exports is the highest reading since May 2007.
  • In a good news, bad news regulatory note, the SEC approved 4x leveraged versions of the S&P 500. For those interested in living and dying by the sword, there is another arrow in your quiver.
  • Since bottoming out late last January, the energy sector surged 50% through mid-December, but has since fallen close to 10%. Interestingly, weekly and monthly crude production levels have climbed to their highest levels in over a year and rig counts are at a two-year high – this in the face of declining oil prices on the year.

Economic Updates:

  • The April U.S. payroll figure of 211,000 new jobs handily beat expectations and marked a nice jump from the 79,000 posted in March, dropping the unemployment rate to 4.4%, a level not seen since May 2007. April wages were a bit soft, only growing 2.5% year over year.
  • ISM Manufacturing (54.8) and Non-Manufacturing (57.5) missed and beat expectations accordingly but both still reside handily in expansion territory.
  • Vehicle sales disappointed in April, missing expectations and recording the first consecutive sub-17 million unit months since January and February of 2015.
  • Core PCE of -0.1% (m/m) signaled soft inflation pressures for the month of April.