Last Week:

  • U.S. equities finished positive for the week: The Dow Jones Industrial Average (Dow) lost 38 points, or fell 0.14%, to 26,505. The Standard & Poor’s (S&P500) index increased 6 points, or rose 0.20% to 2,946. The Nasdaq closed 0.22% higher at 8,164 while the 10-year Treasury ended the week at 2.53%.

  • Economic Data Recap: Last week, the Bureau of Labor Statistics (BLS) reported that the U.S. economy added 263,000 jobs in April, significantly above expectations of 190,000 jobs. The soft February jobs number was revised upwards from 33,000 job gains to 56,000. The unemployment rate fell to 3.6%, down to the lowest level since 1949, although the underemployment rate remained steady at 7.3%. In line with what we have seen during this expansion, the job gains were broad-based, with notable gains in professional and business services, construction, healthcare, and social assistance, showing the continued strength of the U.S. labor market. Average hourly earnings grew modestly, up +0.2%, with the last 12-months earnings growth rate remaining at +3.2%. However, beneath the hood, wages for production workers (hourly wageworkers) were much stronger, up +0.3% during the month, bringing the 12-month earnings growth rate for this group to +3.4%.
  • We also saw the Institute for Supply Management’s (ISM) manufacturing and non-manufacturing index data last week. The U.S. manufacturing PMI data came in below expectations at 52.8%—a decrease from March’s 55.3% reading—showing continued expansion (above 50%) in the manufacturing sector, albeit at the slowest pace since the end of 2016. Although the non-manufacturing index came in at 55.5%—also below last month’s 56.1% and reflecting slower growth—the index remains solidly in expansion territory. While mixed, overall the economic data continues to alleviate concerns around weakness in the U.S. economy and reminds investors of the continued strength of the consumer and the overall economy.
  • First quarter earnings season continues with about 78% of S&P 500 companies having already reported strong revenue growth, up +4.6%, and earnings up +1.7%. Though modest, this compares to expectations of -2.3% earnings growth at the beginning of the reporting season; thus, the modest growth is a positive.
  • Lastly, after months of continuous positive headlines around a potential trade resolution between China and the United States, on midday Sunday we saw headlines about the United States potentially raising the 10% tariff on $200B of Chinese goods to 25%, with the remaining $325B of Chinese imports potentially seeing a 25% rate as well. Global equity markets reacted negatively to the news, as expected. According to China’s Ministry of Foreign Affairs, there is a Chinese delegation still preparing to travel to the United States for trade talks this week. This should generate some headlines during the week as global equity markets continue to digest the unexpected rise in tariff tensions.
Source: The Bureau of Labor Statistics, Strategas Research Partners

Look Ahead:

  • The corporate calendar will be busy this week as first quarter earnings season continues. Notable reporters include Emerson Electric, Occidental Petroleum, Sysco, Anheuser-Busch InBev, Walt Disney, Becton, Dickinson and Company, Cardinal Health, Tapestry, and TD Ameritrade, among others. There will also be a number of broker conferences and investor meetings during the week.
  • On the economic calendar, we will see the Job Openings and Labor Turnover Report (JOLTs), Consumer Credit data, Producer Price Index, and Consumer Price Index (CPI) data to end the week. The U.S.-China trade negotiations should generate headlines during the week as well.