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WEEKLY SUMMARY: Tech saves the day while debate on rates continues
US equities managed to snap a string of three weekly losses. Earnings took center stage with the spotlight on the Magnificent 7 stocks. Despite the high bar, companies have so far been able to beat expectations, helping the S&P 500 recover half of its April losses. The Nasdaq outperformed, up 4% on the week (its best week since the start of Nov 2023), helped in part by strength in Apple and a late rebound in chipmaker NVIDIA. Shares in Google parent Alphabet also surged in the week following its announcement of better-than-expected Q1 earnings along with the company’s first dividend payment. The Dow was the laggard. On the Macro side, the US economy expanded at an annualized rate of 1.6% in Q1, well below consensus estimates of around 2.5% and the slowest pace of growth in nearly two years. Core PCE inflation continued to decline on an annual basis in March, if ever so slightly, falling to 2.82% from 2.84% in February, continuing a downward trajectory that began in October 2022. The 10-year U.S. Treasury yield ended the week near its highest level in almost six months. The pan-European STOXX Europe 600 Index snapped a three-week losing streak and ended 1.74% higher as some encouraging corporate earnings results helped to boost sentiment. The Nikkei 225 Index gained 2.3% while the yen continued to collapse (156). Gold was dumped - its worst week since the start of December 2023. After two down weeks, oil prices rallied, with WTI back above $83.
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U.S. stocks declined during the week, although a rally on Friday helped major indexes recover some of their lost ground. Losses were broad-based, though smaller-cap indexes generally fared worst. The Fed’s rate cut announcement on Wednesday (25bps) was largely expected. However, sentiment turned negative as investors digested hawkish forecasts and commentary from Fed officials regarding the path forward for interest rates. The hawkish tone helped drive the S&P 500 Index lower by nearly 3% for the day, its second-worst day of the year. Political uncertainty in the form of a looming government shutdown also seemed to rattle investor confidence. In economic news, the U.S. Real GDP grew 3.1% in Q3, outpacing a previous estimate of 2.8%, partially owing to increases in consumer spending.